Burford Capital Limited
- Company Name
- Burford Capital Limited
- Stock Symbol
- Class Period
- March 18, 2015 to August 7, 2019
- Motion Deadline
- October 20, 2019
- Eastern District of New York
The complaint charges Burford and certain of its officers and/or directors with violations of the Securities Exchange Act of 1934. Burford is a litigation-financing company that offers services for clients participating in litigation, arbitration, and asset recovery, and other legal financing activities.
The complaint alleges that throughout the Class Period, defendants made false and misleading statements and/or failed to disclose adverse information regarding Burford’s business and financial condition. Specifically, defendants failed to disclose that Burford had manipulated its metrics, including its return on invested capital (“ROIC”) and internal rate of return (“IRR”), in order to create a misleading picture of investment returns to investors, and that these manipulations hid the fact that the Company was at high risk for a liquidity crunch and was already arguably insolvent. As a result of this information being withheld from the market, Burford ordinary shares and American Depositary Receipts (“ADRs”) traded at artificially inflated prices during the Class Period, with the price of its ordinary shares reaching a high of $26 per share.
On August 6, 2019, Muddy Waters Research tweeted that it was going to be issuing a report on an “accounting fiasco that’s potentially insolvent and possibly facing a liquidity crunch.” The next day, August 7, 2019, Muddy Waters issued a report on Burford, disclosing, among other things, that Burford had poor governance, was mismarking the value of the legal cases in which it had invested, and was manipulating its metrics, including ROIC and IRR. According to the report, Burford “has gotten away with aggressive and unwarranted marks by touting ROIC and IRR metrics. We show that [Burford] heavily manipulates these metrics . . . then actively misleads investors about how its accounting for realized gains works. . . . [Burford] has been highly reliant on only four cases for its monetizations, showing that its broader portfolio has lacked strength. Through manipulating ROICs and IRRs, [Burford] portrays itself as a business that derives profits from a broad range of cases in its books.” The report concluded that Burford “is already arguably insolvent.” On this news, the price of Burford ordinary shares fell $5.90 per share, or more than 42%, and its ADRs fell $6.15 per share, or more than 43%, on August 7, 2019.