Quiet day enlivened by LSE trading problems, Burford looks to restore market confidence

“Investors would have been yearning for a quiet Friday after a week of turmoil for the markets driven by recession fears. “And it looked like just such a peaceful interlude was on the cards until technical issues at the London Stock Exchange delayed the start of trading in FTSE 350 stocks, delaying an expected rebound for the index,” says AJ Bell Investment Director Russ Mould.

Burford Capital

“To describe the last week-and-a-bit as turbulent for litigation finance provider Burford Capital would hardly do it justice.

“US research outfit Muddy Waters, not to be confused with the legendary blues singer, disclosed a short position in the stock after publishing negative research on the company; in what was characterised in some quarters as a bear raid.

“Burford helps fund law suits and it is standard industry practice to keep the identity of most ‘invested’ cases under wraps. This limited transparency arguably made the company vulnerable to Muddy Waters line of attack.

“Bear raids effectively involve an individual or group of people betting a share price will fall. They push the price lower by publishing negative information and reports about the company.

“Burford was forced into firefighting exercise, as the heat applied by Muddy Waters singed the stock and left the market valuation at half its level before the latter had intervened.

“The latest moves announced late yesterday suggest at least some of the criticisms levelled at the company have hit home.

“The company has announced it will replace long-serving chairman Sir Peter Middleton, who had moved beyond the recommended nine-year limit, and finance director Elizabeth O’Connell who is married to chief executive Christopher Bogart.

“A move towards a US listing might also help address criticisms that the company is taking advantage of AIM’s more relaxed regulatory set-up.”

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