ALEX BRUMMER: Savers sleep badly thanks to Woodford obduracy, Hargreaves cosiness and feeble FCA
As befits a litigation specialist, Burford Capital has donned combat gear and is challenging California short-seller Muddy Waters over a sophisticated form of market manipulation.
It alleges there was illegal share activity on August 6 and 7, leading to a 50per cent cratering of Burford shares.
A technical expert engaged by Burford found that ‘spoofing’ techniques, favoured by investment cheats, are at the heart of its woes. Spoofing – placing an order and then withdrawing it before it can be executed – was behind the 2010 flash crash on Wall Street which landed the ‘Hound of Hounslow’ Navinder Sarao in court.
The FCA’s involvement is unlikely to make Muddy Waters trader Carson Block fearful
The Financial Conduct Authority (FCA) has begun a probe. Its involvement is unlikely to have Carson Block, the trader behind Muddy Waters, shaking in his boots given the snail’s pace of past inquiries. It might be different were the US authorities to take an interest.
The speed with which the FCA has pounced may appear impressive. But Britain’s savers would be more convinced were the watchdog and its chief executive Andrew Bailey taking an aggressive approach when it comes to dealing with one of Burford’s biggest backers, Neil Woodford. It is no surprise that the fund managers chosen by Bestinvest in its ‘Spot The Dog’ survey are Woodford, his former employer Invesco, and St James’s Place. Each, together with investment platform Hargreaves Lansdown, placed their faith in the discredited guru.
The pain suffered at Woodford’s hands is palpable. It is unconscionable that he is still charging fees to savers who will not be able to get their hands on trapped cash and retirement pots until December at least.
Failure by Woodford to listen to the FCA and his main promoter Hargreaves Lansdown on suspending fees shows insensitivity beyond understanding.
Allowing him to trade himself out of trouble is like watching a gambler on the bookies’ ‘crack-cocaine’ fixed-odds betting machines seeking to recover losses. Whatever the merits of the Muddy Waters critique, there is no escaping the reality that Burford was pumped by Woodford and might have been dumped had he not been desperate to hang on to listed holdings.
Another Woodford triumph is mattress maker Eve Sleep. The shares floated at 101p in May 2017 but have been suspended at 4.9p pending a potential merger with rival Simba.
Unfortunately, a combination of Woodford obduracy, Hargreaves cosiness and FCA feebleness means that memory-foam mattresses or not, savers are condemned to more months of bad sleep.
You only have to look at the surge in Astrazeneca’s share price to understand how R&D can drive long-term growth.
A report by innovation foundation Nesta shows that the short-term way in which pay among FTSE 350 executives is set by remuneration committees and consultants discourages innovation.
Long-term incentive plans, which often pay out the biggest bucks, typically extend for three years. Given that R&D and innovation can take an economic cycle to pay off, Nesta says that only 16pc of incentive plans actually encourage innovation. Some 39pc positively discourage it.
The Government’s Industrial Strategy sets great store on R&D and innovation driving productivity and growth.
Sadly UK directors and shareholders are obsessed with the short-term earnings and share prices which are built into most incentive packages.
Indeed, the recent decision of the board of defence and space giant Cobham to accept a private equity takeover from Advent and Blackstone in the face of fierce opposition from the founding Cobham family and the group’s biggest shareholder Silchester, speaks loudly to how easily boards succumb to easy money over longer term investment.
It’s bitterly disappointing.
The challenge of Netflix, Amazon and upstarts continues to force the pace of mergers in US production and media.
The next deal looks like a coming together of the CBS network with Viacom, which owns Paramount and Channel 5, to create a £26bn group.
Main investor in both companies is the Redstone family-controlled National Amusements, which supports this on-off deal with a tumultuous history.
In the era of Comcast-Sky and Disney-Fox deals, scale looks to be the favoured choice.