Legal action against Tesco ‘far greater destruction of value’ for shareholders

The legal action against Tesco ‘constitutes far greater destruction of value’ for shareholders, says ICSA Policy and Research Director Peter Swabey.

The retail giant is being sued by Tesco Shareholder Claims Limited (TSC), a non-profit group, on behalf of what is believed to be a small group of institutional shareholders.

These shareholders state the reason for action to be Tesco’s profit overstatement in September 2014, which they believe caused permanent destruction of value to shareholders.

According to Swabey, this legal action does nothing to help shareholders, as it is they who will have to pay out the compensation that this small group is claiming and in fact serves to be more destructive than the profit overstatement itself.

He adds that ‘it is very sad to read that predatory US law firms are already seeking to profit from disappointed investors’ and that ‘it would be better were any such claim to be deferred until there is some firm evidence of impropriety’.

The claim is being backed by US law firm Scott + Scott LLP, which has already taken similar action against Tesco in the US.

TSC is expecting to claim around 50-70p per share – Tesco has in excess of 8 billion shares listed.

TSC chairman John Bradley commented: ‘Tesco is one of the widest held stocks in the UK and this loss has hit pension funds and investors across the UK and beyond. We look forward to bringing this claim to court.’

Not the first

The non-profit group’s claim is not the first to be filed in the UK, as law firm Stewarts Law filed a claim against Tesco in November 2014.  

Stewarts Law alleges that directors and senior management knew or were reckless as to whether Tesco's statements to the market were untrue or misleading and/or dishonestly concealed the true position, in breach of the Financial Services and Markets Act.

Sean Upson, Partner at Stewarts Law expects to issue proceedings against Tesco in the High Court in London within six months and the firm will not be waiting for the outcome of the SFO investigation which it believes may take some years still.