Tesco facing legal action from shareholders over £263m overstatement of profits

Tesco is facing legal action from shareholders over its £263m overstatement of profits.

The claim is being funded by US activist investor Elliott and Bentham IMF Limited, a firm that funds litigation in Australia and elsewhere. It is being prepared by leading UK legal firm Stewarts Law, which is also bringing a case on behalf of 300 shareholders against Royal Bank of Scotland over its 2008 rights issue.

Elliott, controlled by billionaire Paul Singer, is best known for taking a hard line approach on Argentinian sovereign debt.

Legal action: Any investor with at least 10,000 Tesco shares is eligible to join

Legal action: Any investor with at least 10,000 Tesco shares is eligible to join

The action will claim the grocer made misleading statements and omissions to the market in relation to profits for recent financial periods, leading to billions of pounds being wiped off its market value.

Any investor with at least 10,000 shares is eligible to join. A Bentham spokesman said the firm would not charge up front for joining the action but typically takes a fee of 25-30 per cent of any settlement.

John Walker, managing director of Bentham Europe, said: ‘The overstatement of earnings has caused significant harm to Tesco’s shareholders. [They] deserve more than just an explanation for what went wrong.’

Sean Upson of Stewarts Law said: ‘We do not intend to wait for the outcome of the Serious Fraud Office investigation, which may take some years.’

Tesco declined to comment.