Business Insider: Lianna Brinded
Mar. 24, 2015, 5:35 AM
A sign is seen on the wall of a Tesco building in Bow, east London August 29, 2014.
Tesco faces a massive shareholder lawsuit over misstating its profits last year by £250 million ($374 million).
US law firm Scott+Scott is claiming that the Tesco accounting scandal caused a “permanent destruction of value to shareholders,” according to the BBC.
The law firm, which seeks to represent institutional shareholders, has already filed a claim against the US arm of Tesco. It is in “active discussions” with British and European institutions to do the same, the BBC says.
“International institutions asked us to find a way to bring a claim in the UK which they can join,” David Scott, managing partner at Scott + Scott, told the BBC.
Tesco declined to comment when reached by Business Insider.
In January this year, the financial rating agencies Moody’s and Standard & Poor’s downgraded Tesco’s credit rating to junk. Tesco is under investigation from the Serious Fraud Office (SFO) into how the group first overstated profits by £250 million in September 2014, and then revised that number upward to £263 million a month later.
The scandal knocked billions off Tesco’s market value, and the stock is now at a 12 year low.
Tesco CEO Philip Clarke left the company and was replaced by Dave Lewis.
Legendary investor Warren Buffett recently launched a scathing attack on Tesco, its management, chiding himself on how he was “embarrassed” by taking too much time to exit the beleaguered stock. He even likened investing in Tesco to living with an infestation of cockroaches.
“During 2014, Tesco’s problems worsened by the month,” he said in his annual letter for his Berkshire Hathaway shareholders. “The company’s market share fell, its margins contracted and accounting problems surfaced. In the world of business, bad news often surfaces serially: You see a cockroach in your kitchen; as the days go by, you meet his relatives.”
He lost £288 million in total from the Tesco stock. Tesco’s stock price has fallen over 44% over the last five years.