Last month, shares of the UK-based litigation funder Burford Capital lost almost half their value. A spokesperson for the company said that trading patterns showed evidence that was consistent with “illegal” market manipulation, and that it has raised complaints with the relevant authorities.
The firm said some traders had cancelled their orders to deliberately depress the price of its shares. The price of Burford’s shares plummeted dramatically after its methods of accounting had been criticised by the US investment firm Muddy Waters.
However, a spokesperson for Muddy Waters insisted that any issues faced by Burford Capital had “nothing” to do with them, while the Financial Conduct Authority announced it was investigating Burford’s claims.
The suggestion that illegal activity has taken place raises the stakes between Burford and those who have been betting against its current business model.
Last week, the company announced that its accounting practices were of industry standard, before releasing another statement to defend itself against “spurious” claims from rivals.
Burford boss Christopher Bogart announced that his firm’s “market-leading business” was the same today as it was “a week ago”, before going on to highlight what had changed:
“A substantial amount of value was wiped by activities we believe to be consistent with illegal manipulation of the market.” Mr Bogart then went on to say that he believed the alleged manipulation was “wrong”.
Understanding Burford Capital
Burford’s role is to lend money to support litigation cases, with a view to profiting from the proceeds.
Analysts from the company have said they conducted research into recent trading of its shares by looking at LSE (London Stock Exchange) data immediately before and after research by Muddy Waters into the firm had been published.
Burford Capital alleges that some traders, who remain unidentified, used strategies to depress the value of Burford’s shares in an attempt to make money from “short selling” – the term used when an investor bets against a share price with the expectation that its price will likely decrease.
It is a commonly used tactic amongst day traders and is not illegal – however, purposely manipulating the price of a share is.