A group of 125 shareholders have filed a claim for more than £100m in damages from Tesco following the grocer’s accounting scandal.
Bentham Europe, part of a litigation finance group, is funding the claim by the institutional investors, who say they were “misled by information inaccurately provided to the market” when the supermarket giant overstated profits by £263m back in 2014.
The legal action will seek to prove that Tesco made misleading statements to the stock market, which were relied on by investors when making investment decisions.
Tesco initially revealed in September 2014 that it had overstated profits, a revelation that sparked a near £2bn slump in its market cap.
The following month, the grocer posted a 92% slump in interim profits and confirmed that the profit overstatement was £263m – wiping a further £1bn off its value.
Law firm Stewarts Law and Bentham Europe have spent two years putting the case together ahead of today’s filing.
Bentham Europe chief investment officer, Jeremy Marshall, said: “The misstatement 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.”
Stewarts Law partner Sean Upson, who is leading the case, added: “Tesco has misstated 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.”
The Serious Fraud Office has charged three former Tesco executives with fraud in relation to the accounting scandal.
The supermarket giant’s former UK boss Chris Bush, ex-UK finance director Carl Rogberg and former commercial director for food John Scouler have all been charged with one count of fraud by abuse of position and one count of false accounting. If found guilty, the charges carry sentences of up to seven and 10 years respectively.
The trio, who all deny the charges, will stand trial next September.
Tesco declined to comment on the action by investors.