August 8, 2019 / 12:14 PM / 3 months ago

Burford Capital considers share buyback after Muddy Waters short attack

(Reuters) - Burford Capital (BURF.L), a London-listed fund that finances lawsuits in return for a cut of any payouts, said it is considering buying back shares, a day after short-seller Muddy Waters criticised its accounts and said it had bet on its shares falling.

“The board is ... considering the company buying back its own shares, given the potential investment return the shares represent at their current price,” it said in a statement.

Muddy Waters, known in financial markets for regularly declaring short equity positions on the basis of its in-house research, had also criticised Burford’s top shareholder Invesco Asset Management and under-fire British money manager Neil Woodford for what it termed improper behaviour.

In a detailed response on Thursday, Burford called the Muddy Water report “false and misleading”.

Shares in Burford rose as much as 37% to 826.5 pence by 1244 GMT, after losing 1.1 billion pounds in value as a result of Wednesday’s report. If gains hold, the stock will regain about half the value it shed in the previous session.

Burford, which last month reported a 36% rise in first-half profit after tax to $225 million, also reiterated that its chief executive and chief investment officer would buy a significant number of the company’s shares.

Two non-executive directors had also asked for clearance to make market purchases, as have numerous other Burford employees, it added.

Burford added that it was solvent, with strong cash flow and had good access to expansion capital. It also said its debt level was low, in response to the suggestion that Burford is “arguably insolvent”.

Muddy Waters had also said Burford “egregiously” misrepresented its return on invested capital and internal rate of returns. Burford said its accounting and financial reporting was transparent.

Muddy Waters did not respond to a request for immediate comment.

The short-seller’s focus on Burford comes less than a month after China’s ANTA Sports Products (2020.HK) rejected an allegation by Muddy Waters that the Chinese sports brand had manipulated financial information.

French market regulator AMF’s probe into Muddy Waters and Casino Guichard Perrachon (CASP.PA) is expected to reach a conclusion soon.

In 2015, Muddy Waters criticised Casino’s structure and accounting practices, saying it was “dangerously leveraged” and managed for the short-term.

Reporting by Noor Zainab Hussain in and additional reporting by Muvija M in Bengaluru; editing by Jason Neely

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