Recently launched third-party funder Bentham Europe is to back legal action on behalf of shareholders against Tesco over the recent revelations that it overstated its earnings.
The claim, being run by London litigation boutique Stewarts Law, will seek to establish that shareholders are entitled to compensation for losses caused by Tesco’s alleged breaches of the Financial Services & Markets Act.
On 23 October 2014, Tesco announced that recent profit overstatements totalled £263m, which wiped over £2bn from its share price. The supermarket further downgraded its expected profits for the current financial year significantly and reported a fall of 92% in pre-tax profits.
The action will claim that Tesco has made misleading statements and omissions to the market in relation to its profits for recent financial periods.
This alleged conduct has resulted in, amongst other things, the ongoing suspension of senior Tesco executives and investigations by lawyers, a forensic accounting firm, the Financial Conduct Authority and now the Serious Fraud Office.
Sean Upson, a partner at Stewarts Law, said: “We expect to issue proceedings against Tesco in the High Court in London within six months. We do not intend to wait for the outcome of the SFO investigation, which may take some years.”
All current and former shareholders who acquired at least 10,000 Tesco shares during the period 17 April 2013 to 22 October 2014, and who had not sold all of those shares prior to the market announcements made by Tesco on 29 August, 22 September or 23 October 2014, are eligible to participate in the proposed action.
Bentham Europe opened for business in London earlier this year. It is a joint venture between listed Australian funder IMF Bentham and subsidiary entities of funds managed by Elliott Management Corporation, which have billions of US dollars under management globally. It is a wholly owned subsidiary of Bentham Ventures BV.
John Walker, the managing director of Bentham Europe, said: “The overstatement of earnings has caused significant harm to Tesco’s shareholders who bought shares since 17 April 2013. Shareholders are justifiably concerned that Tesco has misrepresented its earnings resulting in material losses.
“We expect the legal claim to reveal the true extent of the problem and allow shareholders to seek compensation for harm suffered”.
He said that in order for the claim to proceed, a “sufficient number” of shareholders will need to join the action.