Burford Capital BUR
Burford cherry-picks which investments count as 'concluded' to avoid truing up marks; the 110% vs 19% gap between unconcluded and concluded returns exposes systematic fair-value manipulation.
Thesis
This follow-up note from Muddy Waters rebuts Burford Capital's presentation defending its IFRS 9 fair value accounting and reiterates the short thesis that Burford manipulates valuations. Carson Block argues the company cherry-picks which cases it deems 'concluded': $717M of net fair value gains sit in un-concluded cases versus only ~$130M in concluded ones, and the gain-to-cost ratio is 110% for unconcluded vs just 19% for the full 76-case concluded book. Further, only 26 of 76 'concluded' cases ever experienced fair value changes — inconsistent with a mandatory IFRS 9 regime. Outside of four cases (two problematic: Napo and Desert Ridge), Burford's ROIC and IRRs are called pedestrian and likely insufficient to cover operating costs. Burford is accused of hiding behind attorney-client privilege rather than disclosing Petersen's carrying value or gross FV gains by period.
SCQA
Burford Capital is a UK-listed litigation finance firm that applies IFRS 9 fair value accounting, marking ongoing cases to a model estimate and truing up to realized outcomes only when an investment is deemed 'concluded'.
Burford cherry-picks 'concluded' designations: $717M of FV gains sit in unconcluded cases vs $130M in concluded, unconcluded NFVG/cost runs 110% vs 19% for concluded, and only 26 of 76 concluded cases ever had any FV movement.
Muddy Waters demands Burford disclose gross fair value gains by period and the carrying value of its Petersen investment, stop hiding behind attorney-client privilege, and end the manipulation of what it deems 'concluded'.
No explicit target price; thesis implies the equity is materially overvalued because the bulk of booked gains — sitting in unconcluded cases at implausible 110% mark-up ratios — is likely unrealized and unrealizable.
The three reasons
- 1
Only $130M of FV gains in 'concluded' cases vs $717M in unconcluded — marks sit where scrutiny is absent
- 2
Unconcluded cases show 110% NFVG/cost vs only 19% for concluded — evidence of aggressive marking
- 3
Only 26 of 76 'concluded' cases ever had any fair value changes — inconsistent with IFRS 9 claim
Primary demands
- Disclose gross fair value gains by period
- Disclose carrying value of the Petersen investment
- Stop using attorney-client privilege as a pretense to avoid accounting transparency
- Stop cherry-picking which investments are deemed 'concluded'
KPIs cited
Pattern membership
Where this document fits across the library's 12 rhetorical / structural patterns.
Notable slides (1)
Notes
Two-page Word-style research note (p1 is boilerplate Terms of Use; p2 is the actual argument). Follow-up in the August 2019 Muddy Waters vs Burford campaign, responding to Burford's own presentation defending its fair value accounting. No charts or graphics — pure prose rebuttal with a handful of accounting ratios. Signed by Carson Block as Director of Research. Short position disclosed in the generic Muddy Waters disclaimer, no specific size given.