Tesco faces legal battle with shareholders over profits scandal
Angry shareholders are poised to launch legal action against Tesco over the billions of pounds in value wiped off the supermarket chain in 2014 following revelations of its £265m profits black hole.
Law firm Stewarts Law said it will shortly be writing to the company on behalf of institutional shareholders as the prelude to formal legal action, which will seek to prove that misleading statements were made to the market and that such statements were relied upon to make investment decisions.
The firm, backed by third party litigation funder Bentham, has already signed up between 50 and 100 institutional shareholders and expects many more to join as the legal action progresses.
Jeremy Marshall, chief investment officer at Bentham, said: "The prospect of litigation is a necessary consequence of the apparent failure of Tesco’s former management to protect their shareholders from avoidable losses. We hope the company will face up to the seeming failings of previous management and move swiftly to resolve this dispute.”
Stewarts Law's statement was made after the Groceries Code Adjudicator published a scathing report into Tesco's supplier practices, concluding that the retailer knowingly delayed payments to suppliers.
Read More: How Tesco mistreated its suppliers
Tesco remains under investigation by the Serious Fraud Office (SFO), which also expected to report on its findings as soon as this week.
Chief executive Dave Lewis, who took over the helm at Tesco just after the accounting scandal revelations, said the company had "moved on" and insisted that it made significant changes to the business and its relationship with suppliers.
He said: “Over the last year we have worked hard to make Tesco a very different company from the one described in the GCA report. The absolute focus on operating margin had damaging consequences for the business and our relationship with suppliers. This has now been fundamentally changed."