London — Short-seller Muddy Waters targeted Burford Capital, driving the litigation-finance company’s stock down as much as 66% and piling pressure on fund manager Neil Woodford, a big Burford shareholder.

London-listed Burford overstates the returns it earns on its investments and has questionable financial reporting and governance, Muddy Waters, the research firm founded by Carson Block, said in a report on its website on Wednesday. Shares of Burford — which counts Woodford Investment Management among its top holders — had slumped by 19% on Tuesday amid market speculation about Muddy Waters’ next target...

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