A law firm is soliciting angry Tesco shareholders to participate in a lawsuit against the UK’s biggest retailer following the accounting scandal which wiped billions of pounds off the company’s stock market value.
Stewarts Law said the legal action would seek to establish whether shareholders were entitled to compensation for financial losses suffered after Tesco’s admission that it had overstated first-half profits by £263m. The claim will allege that directors and senior management “knew or were reckless as to whether Tesco’s statements to the market were untrue or misleading”.
Tesco is also facing potential legal action in the US where several law firms are trying to muster support for claims.
In September Tesco’s new chief executive, Dave Lewis, told the City that a whistleblower had provided evidence that pointed to accounting irregularities. The company is now the subject of a Serious Fraud Office (SFO) investigation.
“We expect to issue proceedings against Tesco in the high court in London within six months,” said Stewarts Law partner Sean Upson. “We do not intend to wait for the outcome of the SFO investigation, which may take some years.”
Stewarts Law is already acting for more than 300 institutional shareholders who got their fingers burned in RBS’s controversial £12bn rights issue in 2008. The Tesco lawsuit is being bankrolled by Bentham Europe, an offshoot of Australian group IMF Bentham which specialises in funding litigation.
Investors need to own or have owned at least 10,000 Tesco shares – a holding that would have been worth more than £20,000 before the scandal was unearthed – to take part. For the claim to proceed a “sufficient” number of shareholders will need to join the action, the firm said, with a closing date of 23 January to come forward.
“Shareholders ought to be able to allocate capital on the London Stock Exchange assuming earnings are not being misstated,” said John Walker, managing director of Bentham Europe. “When there has been a material misallocation of capital due to misstated earnings, compensation ought to be paid. This is the biggest crisis in Tesco’s history and shareholders – who saw billions wiped off the value of the company within days – deserve more than just an explanation for what went wrong.”
