Muddy Waters Hasn’t Managed to Turn the Bulls on Burford Capital

(Bloomberg) --

Burford Capital Ltd. has had a challenging few weeks. Yet despite being the target of a high profile short-selling report, facing a potential lawsuit from investors and seeing its shares fall more than 40%, analysts are still overwhelmingly bullish.

Eight of the nine analysts tracked by Bloomberg still rate the stock a buy or equivalent, with only Canaccord Genuity Ltd. holding a sell recommendation. London-traded Burford has plunged since Muddy Waters first tweeted about a new unidentified short position on Aug. 6. It published a report a day later, questioning Burford’s financial reporting and governance, which the company labeled as “false and misleading.”

The average price target on Burford has decreased by less than 1% to 2,190 pence since the release of the Muddy Waters report, with only two of the nine analysts tracked by Bloomberg lowering their targets since Aug. 7. That implies the shares could almost triple from Thursday’s closing price of 808 pence and market value of 1.77 billion pounds ($2.16 billion).

“Burford is still the long-term leader in a large, under-penetrated market offering attractive, uncorrelated returns,” Jefferies LLC analyst Julian Roberts wrote in a note Thursday with a buy rating on the stock.

Analysts at Berenberg earlier this week noted that valuing the company is currently challenging because of changing market sentiment and daily newsflow. “In time, we expect analysts and investors to focus on tangible data points relating to capital deployed and sustainable levels of returns,” analysts including Donald Tait wrote in a note Monday with a buy rating.

Burford last week named a new chief financial officer and announced it is starting a search for new board members and plans to seek a secondary listing in the U.S., in response to the short seller’s report.

“There are a number of questions that still need answering and comfort needs to be given,” in particular regarding returns and funding capability, Canaccord analyst Justin Bates said in an email. Canaccord’s price target of 1,240 pence is the lowest among analysts tracked by Bloomberg.

To contact the reporter on this story: Lisa Pham in London at lpham14@bloomberg.net

To contact the editors responsible for this story: Beth Mellor at bmellor@bloomberg.net, Jon Menon

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