Claims that market manipulation had caused an artificial decline in litigation firm Burford Capital’s share price have been dismissed as “speculative” by the High Court, which threw out Burford’s attempt to obtain trading data from the London Stock Exchange (LSE).
Burford has been on the offensive ever since claims from US short-seller Muddy Waters surfaced in August, accusing the firm and now-former Invesco stockpicker Mark Barnett of "unethical behaviour".
The law financer claimed a subsequent 56% share price plunge was artificially caused by "market manipulation in the form of spoofing and layering".
Burford took the LSE to court as it attempted to gain access to trading data in order to prove this was the case, retaining expert Columbia University Professor Joshua Mitts, as well as to disclose the identities of market participants who traded in Burford's shares when the alleged manipulation took place.
However, the Court judged that Mitts' conclusions were "speculative", noting: "In my judgment, the fully true statement is that it is impossible to determine from the data Prof Mitts reviewed whether any Share Order Events were or may have been manipulative; and any claim that there was market manipulation on 6 or 7 August 2019 by reference to Prof Mitts' data analysis is speculative."
In a statement to the stockmarket, Burford hit back at the decision, noting the conundrum it brings. "Without the trading data sought by Burford, it is impossible to prove market manipulation, which is why Burford brought its application in the first place on the basis of Professor Mitts' extensive expert analyses," the firm said.
"While Burford believes the Court's judgment is flawed as a matter of law and deprives shareholders of redress, there is also a limit to the level of effort that it is sensible and appropriate for Burford to expend, and thus Burford does not intend to appeal the Court's ruling."
Bryan Cave Leighton Painser (BCLP), the firm that defended the LSE, claimed the case was the first of its kind to be brought against a trading venue in the UK.
BCLP partner Andrew Tuson said: "The Court found that, even if there had been evidence of market manipulation, justice would not have required disclosure of the identities of market participants' confidential trading data in this case, given the damage which such disclosure could cause to market participants and public confidence in the FCA given their own extensive analysis had found no evidence to support Burford's allegations."
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