Burford Capital CEO Christopher Bogart and co-founder Jonathan Molot have shot back at US-based hedge fund Muddy Waters’ claims that Burford misreports its earnings, and is ‘arguably insolvent.’ In a call to investors earlier today, Bogart characterized the allegations as ‘false and misleading,’ and sought to assure investors by stating that both he and Molot had personally invested $4MM into Burford’s stock after the Muddy Waters announcement was made.
An LFJ Conversation with Michael Kelley, Partner, Parker Poe
Burford Capital CEO Christopher Bogart and co-founder Jonathan Molot have shot back at US-based hedge fund Muddy Waters’ claims that Burford misreports its earnings, and is ‘arguably insolvent.’ In a call to investors earlier today, Bogart characterized the allegations as ‘false and misleading,’ and sought to assure investors by stating that both he and Molot had personally invested $4MM into Burford’s stock after the Muddy Waters announcement was made.
As reported in CDR, Bogart and Molot added during their call that employees remain steadfastly confident in the company. Bogart insists that Burford’s accounting practices are transparent and have consistently met industry standards for years. He points out that its fair value accounting practice is widely-used in the Finance sector, and also points to ‘major inaccuracies’ in Muddy Waters’ report. Bogart reiterated that Ernst & Young has audited and confirmed Burford’s accounting.
Bogart also labelled the accusation that Burford is ‘arguably insolvent’ as patently wrong, claiming the word ‘arguably’ was inserted to avoid a lawsuit. Burford, however, is currently investigating whether a lawsuit is appropriate.
Speaking of lawsuits, a pair of law firms – Rosen Law and Schall Law – are each conducting investigations into whether Burford’s management is at fault for the precipitous stock drop, which has negatively impacted shareholders.
Depending on how this plays out, it could have wide reverberations for the industry. Already, rivals LCM and Manolete Partners – both publicly-traded companies like Burford – saw their stocks drop the day of the Muddy Waters announcement, only to watch them seesaw back up today. Of perhaps larger concern is how this will impact the industry’s ability to raise capital going forward, and whether private funders will eschew going public, as some – including Vannin Capital and Litigation Lending – have both publicly considered.
Doubtless this will continue to play out in both the media and the financial markets. We’ll keep a close eye and continue to update accordingly.
