Yesterday MT wrote that Tesco might be finally closing the door on the Philip Clarke era as its new chief exec, Dave Lewis, tries to lead it out of the doldrums. But today there's a reminder that the fallout over the supermarket’s £263m profit overstatement is far from over.
Tesco is facing a lawsuit filed on behalf of shareholders in the UK and Europe for the impact the overstatement had on its share price. Tesco Shareholder Claims (TSC), a group funded by the US law firm Scott + Scott will bring the claim, after the firm launched a similar case on behalf of investors in the US last year. TSC says it expects to claim for between 50p and 70p per share, which would mean a potential cost to Tesco running into the billions if it was successful.
‘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,’ said the group’s chairman, John Bradley. ‘We look forward to bringing this claim to court".
The group claims that Tesco’s overstatement has caused a ‘permanent destruction of value to shareholders’ but to be fair, its share price hasn’t been that out of kilter with the rest of the sector.
The share prices of Britain's three listed supermarkets - Tesco in blue, Sainsbury's in green, Morrisons in red. Credit: Yahoo Finance
Since September 19, the last full day of trading before the overstatement came to light, Tesco has outperformed its rival Sainsbury’s and hasn’t been far behind Morrisons either. Of course that’s ignoring the fact that Tesco’s woes have been a drag on everybody else’s share price, but the grocery sector’s problems run much deeper than Tesco’s financial mismanagement.
The claim is expected to take months to put together and is sure to drag on for much longer. A similar claim is currently being pursued against RBS for £4bn. Filed by the RBoS Shareholder Action Group in 2013, it's not expected to be brought before a court until next year. The TCS claim follows a similar one brought by UK lawyers Stewart Law, announced last year.
The claim will join the rack of threats hanging over Lewis’s head including investigations by the Serious Fraud Office and the Groceries Code Adjudicator. Even if the lawyers don't succeed, there's still plenty of sleepless nights ahead.