Burford Capital has accused short sellers of spooking investors as its share price entered freefall for the second day in a row this morning.
Shares in the litigation finance company dropped 20 per cent yesterday, and have continued their plunge today.
Burford Capital’s share price was down 43 per cent to 636p by mid-morning, leaving stock at its lowest level since December 2016.
Burford’s board of directors issued a statement this morning saying that it “believes that yesterday’s share price movement relates to a rumour of a potential ‘short attack’ or ‘bear raid’”.
“[That is] a tactic where short sellers take on a short position in a company’s stock and then engage in claims about the company in an effort to alarm investors, depress a company’s stock and profit from the decline,” Burford said.
In its statement, Burford’s board said it will take legal action if it discovers “actionable misconduct”.
Short seller Muddy Waters confirmed that it now holds a short position in Burford shortly after the board’s announcement.
It has published a report accusing Burford of “misrepresenting” aspects of its results.
In a second statement, Burford acknowledged the release of Muddy Waters’ report and said it will “review the report thoroughly and respond to it as rapidly as possible”.
It added that litigation finance returns hit their highest level ever on 30 June, and that it counted over $400m in cash and cash equivalents early this month.