LONDON (Reuters) - A U.S. law firm is asking Tesco (LONDON:TSCO) shareholders to join a group that wants to bring a lawsuit and seek billions of pounds in compensation for losses relating to the British retailer's overstatement of profit last year.
Tesco said on Sept. 22 it had overstated first-half profit by 250 million pounds. It raised that figure to 263 million pounds when it published first-half results on Oct. 23.
The overstatement led to a sharp decline in the market value of Britain's biggest retailer, driving its share price down to a 14 year low, and prompted a criminal investigation by Britain's Serious Fraud Office.
Tesco Shareholder Claims Limited (TSC), a group funded by U.S. litigation firm Scott + Scott, said on Tuesday it would seek to bring an action against Tesco on behalf of institutional shareholders, arguing the profit overstatement "caused a permanent destruction of value to shareholders."
Tesco declined to comment.
Scott + Scott has already brought an action against Tesco in the United States, while British law firm Stewarts Law launched a similar move in November, alleging Tesco directors and senior managers knew or were reckless as to whether the firm's statements to the market were untrue or misleading.
TSC will be represented in Britain by McGuire Woods.
"A permanent destruction of value has occurred and had the accounting irregularities not taken place the share price, and value of the company, would today be materially higher," said TSC.
It said it expected the claim, open to any institutional shareholder that bought shares in Tesco prior to the firm's Sept. 22 announcement, to be in the region of 50-70 pence per share. Tesco has 8.1 billion shares listed, suggesting the claim could be for billions of pounds.
Shares in Tesco were down 0.6 percent at 245.2 pence by 9:20 a.m., valuing the business at about 20 billion pounds.
TSC said it was in talks with institutions in Britain, Europe and the United States about joining the claim on a no win, no fee basis.
Tesco's accounting practices are also being investigated by Britain's Financial Reporting Council, while the grocery industry watchdog, the Groceries Code Adjudicator, is investigating the firm's relations with its suppliers.