Last week, shares in the litigation funder plunged by more than a third after notorious US short-seller Muddy Waters accused it of “Enron-esque mark-to-model accounting” and “egregiously misrepresenting” its returns.
After rebuffing the accusations, Burford has once again hit back, claiming that a forensic examination of trading data has uncovered evidence of ‘spoofing’ and ‘layering’.
Spoofing is when someone places a big sell order at just below the current offer price, but cancels the order before it is executed. They then repeat this process, which brings down the share price without any shares being sold.
Layering is similar to spoofing, the difference being that traders place sell orders above the current offer price. These are virtually certain not to be executed – who would agree to buy shares for more than the going rate? – but they still affect pricing as they suggest there are lots of shares for sale.
Burford estimates that almost £90mln of sell orders were placed and cancelled on 6 August – the day Muddy Waters tweeted about the company.
The company, which used to be the biggest on AIM, said it is continuing to analyse the data but has made regulators and prosecutors aware of its findings so far.
'Wrong and illegal'
“Burford's market-leading business today is the same as Burford was a week ago,” said chief executive Christopher Bogart.
“What has changed is that a substantial amount of market value was wiped out by activity we believe is consistent with illegal market manipulation that has nothing to do with Burford's business. That is wrong and that is illegal.”
Muddy Waters responded to Burford's claims by saying: "The only manipulation is that of Burford’s return metrics, accounts, and disclosures."
Burford’s shares were down another 2.4% to 830p on Monday. This time last week, they were changing hands for over 1,400p.
--Updates for share price and Muddy Waters response--