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US firm launches class action over Burford share crash

New York: Law firm launches contingency class action

The first shareholder class action against litigation funder Burford Capital arising out of the recent report by US short seller Muddy Waters [1] has been filed in New York.

The lawsuit filed by The Rosen Law Firm, an investor rights practice, claims the company made “false and/or misleading statements” between 18 March 2015 and 7 August 2019.

Alternatively or in addition, it says Burford failed to disclose that it “has been manipulating its metrics, including ROIC and IRR, to create a misleading picture of investment returns to investors”, hiding “the fact” that it was at high risk for a liquidity crunch and is already arguably insolvent.

As a result, the claim continues, Burford’s statements about its business, operations and prospects “were materially false and/or misleading and/or lacked a reasonable basis at all relevant times”.

When the Muddy Waters report was published, the lawsuit says, there was a “precipitous decline in the market value of the company” and investors suffered “significant losses and damages”.

The Burford share price dropped from 1381p on 5 August to 605p two days later after Muddy Waters first teased its report and then released it.

The shares have recovered somewhat since after the funder mounted an aggressive defence [2], but been up and down in the intervening period, closing yesterday at 808p. It reached a high of 2040p a year ago. Last week, Burford announced changes to its governance [3].

Rosen, which is now seeking a lead claimant, is acting on a fully contingent basis and its retainer says it may apply for a fee of up to 33.3% of the recovery plus disbursements, subject to court approval.

The action also names Burford co-founders Chris Bogart and Jonathan Molot – chief executive and chief investments officer respectively – chairman Sir Peter Middleton and director Charles Parkinson as co-defendants.

The Rosen Law Firm has announced nine other securities class actions this month alone.