Burford (BUR) – Statement
Burford themselves appear to believe that today’s upcoming Muddy Waters’ report will be about them and share the market’s broad view of what it will say. If I were a Burford shareholder I would find the aggressive tone of today’s statement highly concerning. It contained no new information and no indication that they would respond to any specific concerns. My particular concern is that while they say they have the ability to manage cash outflows, they do not take the opportunity to say that they have significant liquidity to survive in a worst-case scenario where no new money can be raised, not even by cutting back investment in new cases to a minimum.
On the other hand Muddy Waters’ track record is rather mixed with few knock-out successes since they became famous in 2011 for calling out Sino-Forest, a fraudulent Canadian quoted Chinese company. Even this success could be attributed to the founder’s China-specific business experience and an era where hunting down fraudulent Chinese companies listed abroad was akin to shooting fish in a barrel.
I will be reading Muddy Waters’ report with interest.
[Edit: I have now finished reading the report. My conclusion is that is that it has considerable merit and in particular there is every indication the Burford has been operating as a pyramid scheme relying on arbitrary fair value gains on ever increasing numbers of current cases to counteract negative fair value adjustments on older cases. As I hopefully made clear earlier, I am neither long nor short the shares]