Tesco in £100M investor damages claim storm

02-Nov-2016 - Last updated on 02-Nov-2016 at 11:36 GMT

Tesco is facing damages claims worth more than £100M

Related tags Tesco Finance

Tesco is facing damages claims totaling more than £100M, after around 125 institutional investors claimed the supermarket’s 2014 accounting irregularities cost them millions of pounds, it was revealed this week.

The investors, funded by Bentham Europe, claimed Tesco breached the Financial Services & Markets Act when it overstated its profits by £326M. They said the supermarket misled the stock market with its financial update and omitted information that investors relied upon when making investment decisions.

The claim was filed in the High Court on October 31, Bentham Europe said.

‘More than £100M in damages’

Partner at Stewarts Law Sean Upson, who is involved in the case, alleged: “Tesco has mis-stated its accounts, and in particular its treatment of payments from suppliers, to give the appearance of static trading margins.

“The reality was that those margins were falling. Institutional investors were therefore misled when making investment decisions in respect of Tesco. This is precisely the type of wrongdoing which the Financial Services and Markets Act was designed to redress and therefore to prevent.”

Tesco’s value dropped by around £3bn in 2014, after the full extent of the profit overstatement was announced. Its profits dropped by 92%, and subsequently went on to lose £6.3bn the next year.

‘Substantial damage’

Bentham Europe chief investment officer Jeremy Marshall said: “The mis-statement of profits leading to a dramatic collapse in the Tesco share price caused substantial damage to many shareholders who manage money for thousands of investors.

“Investors have a right to rely on statements made by companies to ensure that they correctly allocate capital. The claim will assert that Tesco’s misstatements are in clear breach of its obligations under the Financial Services & Markets Act and investors must be compensated.”

Tesco declined to comment on the damages claims.

Meanwhile, the Serious Fraud Office has charged three former Tesco executives with one count of fraud and one count of false accounting. Christopher Bush, Carl Rogberg and John Scouler (former md, finance director and commercial director respectively) all denied the charges, and will stand trial in September next year.