Burford is one of the largest (if not the largest) firms in litigation funding - a relatively new multibillion industry whose historically strong returns have begun to attract significant investments from pension funds, endowment trusts and the like. 

The company is popular with investors. Those looking to get a feel for the company as an investment over the past few years would do well to read through the comments over at Burford Capital - An Exception to the Stock Rank Rules?.

Coming to the stock anew, and with all the buzz of yesterday’s shorting attack, it appears that BUR is either forging a brand new, massive, lucrative financial asset class or it is conning the market. Or, possibly, a bit of both. 

A superficial glance shows some questionable cash flow statements - full of large operating outflows and frequent capital raises. I admit that I don’t know much about the economics of the nascent litigation funding industry, but I’ve yet to meet someone who does.



The whole thing was blown wide open yesterday by the Muddy Waters short dossier.

The StockRanks are suspicious of Burford, but many subscribers are loyal long-term shareholders. Some smart people believe it is ‘the next BlackRock’ (Artem Fokin of Caro-Kann Capital, for example). Other smart people believe BUR management has been ‘egregiously misrepresenting’ economic reality (enter Muddy Waters). 

So, Burford Capital: from 120p to 2,000p in five years, and then from 2000p to 600p in twelve months. And then there’s today: down 7.3% to 559p at 11am, up an astonishing 40% by 2pm. That’s quite the ride… It reminds me, oddly, of one of the greatest opening lines ever written - from Dickens’ A Tale of Two Cities. I quote it below (because why not)?

"It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of Light, it was the season of Darkness, it was the spring of hope, it was the winter of despair, we had everything before us, we had nothing before us, we were all going direct to Heaven, we were all going direct the other…

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