Legal financier Burford Capital has bowed to pressure from investors and short-sellers and agreed to improve its corporate governance.
Bosses at the firm have seen its share price nosedive over the past week after US short-seller Muddy Waters published a scathing report raising questions about Burford’s accounting practices and governance.
On Thursday, Burford said it had listened to the criticisms and would appoint two new independent directors to its board, remove the chief financial officer, and spelled out plans to list the business in London and New York.
One criticism had been that finance chief Elizabeth O’Connell and chief executive Christopher Bogart are married.
Burford said Ms O’Connell would now step down with immediate effect, becoming chief strategy officer, and replaced with former Morgan Stanley banker Jim Kilman.
It added: “We believe that concern is unjustified given Burford’s control structure and ignores Burford’s finance and accounting structure.
“Nevertheless, it is clear that investors would prefer an alternative CFO, and thus Burford announces that, with immediate effect, Jim Kilman will take on the role of CFO to buttress confidence in Burford’s financial disclosures and to guide the Company through the change in its listing discussed above
“Mr Kilman was most recently vice chairman of Morgan Stanley Investment Banking and has spent his career in the speciality finance industry. Mr Kilman knows Burford well, having been its principal investment banker at Morgan Stanley, and has been serving as a senior adviser to Burford since his departure from Morgan Stanley in 2016 among numerous other activities.”
He will stay for two years whilst a permanent replacement is found.
The company also said it wants to now list both in London and in New York. Since joining the junior AIM market in 2009, it has grow from being worth £80 million to £3 billion.
It said: “Investors have asked for more clarity and granularity around our plans. Investors have also made it clear that they do not support Burford remaining solely AIM listed.
“Burford has concluded that it will endeavour to procure a second listing on either NASDAQ or the NYSE as a first choice.”
Bosses added that they believed they could raise more funds from investors by listing in the US, and preferred to do that instead of joining the main London Stock Exchange, where there are stricter governance rules.
But Muddy Waters was unimpressed with the announcement. In a statement founder Carson Block said: “The notion that appointing Mr Kilman as CFO will substantively improve governance is a farce.
“It is clear from this that Burford is more interested in imposing fig leaves than real guard rails. We note Mr Kilman was Burford’s principal investment banker at Morgan Stanley.
“Burford investors would be much better served by a CFO from the outside who is untainted by Burford’s conduct to date. Given the complexity of Burford’s accounting, the CFO should be an accountant who has demonstrated a strong commitment to ethics. Investment bankers don’t often qualify on that front.”