Australian litigation funder Bentham has made its biggest entry yet in the European market by agreeing to fund a class action against supermarket giant Tesco.
The European subsidiary will fund legal action on behalf of shareholders who are claiming for compensation for losses caused by Tesco’s recent overstated profits announcement.
London firm Stewarts Law will allege breaches of the Financial Services and Markets Act after the announcement triggered a stock market collapse and more than £2bn was wiped off the Tesco share price.
In October, Tesco told the stock market that its previous profit announcement to investors was overstated by £263m.
The supermarket has denied deliberately misleading shareholders and has stated that nobody in the company has gained financially as a result of the overstatement of performance.
The class action is open to all current and former shareholders who acquired at least 10,000 Tesco shares between 17 April 2013 and 22 October 2014, and who had not sold all their shares by the time of the market announcements.
The claim will only proceed if a sufficient number of shareholders join the action.
The investment is expected to run into millions of pounds if the anticipated number of claimants come forward.
If the shareholders’ case loses, Bentham has said it will pay for the costs of the claimants in pursuing the case and not recoup these and also cover any adverse costs orders made against the claimants.
Lawyers will argue that Tesco has made misleading statements to the market and omissions in relation to its profits for recent financial periods.
John Walker, managing director of Bentham Europe, said: ‘Shareholders ought to be able to allocate capital on the London Stock Exchange assuming earnings are not being misstated.
‘When there has been a material misallocation of capital due to misstated earnings, compensation ought to be paid.’
Stewarts is already acting for more than 300 shareholders in a litigation with Royal Bank of Scotland.
The Tesco announcement is already subject to an investigation by the Financial Conduct Authority and Serious Fraud Office, but the firm has opted to act immediately.
Partner Sean Upson said: ‘We expect to issue proceedings against Tesco in the High Court in London within six months. We do not intend to wait for the outcome of the SFO investigation which may take some years.’
Bentham Europe founded this year and is a joint venture between IMF Bentham Limited, a publicly listed company which funds litigation and arbitration claims in Australia and other jurisdictions, and subsidiary entities of funds managed by Elliott Management Corporation, a US-based advisory firm.