Tesco hit over market abuse; investors challenge Booker deal

Tesco incurred the wrath of the FCA over an accounting mishap in 2014 on Wednesday and faced opposition from majority shareholders, Schroders and Artisan Partners, over its proposed takeover of Booker.

Tesco hit over market abuse; investors challenge Booker deal


The FTSE 100 food retailer has agreed to pay a £129m penalty for providing “a false or misleading impression” about the value of publicly traded shares and bonds in the company during a three week period in 2014.

It will also provide compensation to shareholders within the range of £85m, excluding interest.

This is the first occasion the regulator has used its powers under section 384 of the Financial Services and Markets Act to demand restitution from a listed company for market abuse.

On 29 August 2014, Tesco posted a trading update that put its trading profit for the half year at £1.1bn.

However, on 22 September 2014, the grocer revised its estimate, stating that an “accelerated recognition of commercial income and delayed accrual of costs” had caused it to overshoot its expected profit.

This led to purchasers of Tesco shares and bonds to pay a higher price than they would have paid had the false information not have been disseminated, argued the regulator.

Chief executive David Lewis, who assumed the role around the time the accounting scandal took place, reiterated that the management team has been concerned with “fundamentally transforming” the business over the last two and a half years and has “fully cooperated” with the investigation.

“We sincerely regret the issues which occurred in 2014 and we are committed to doing everything we can to continue to restore trust in our business and brand.”

Lewis “underwent a baptism of fire when he took over as CEO in 2014,” reflects Hargreaves Lansdown senior analyst Laith Khalaf, which is why Lewis and co “will now be hoping to draw a line under the matter, and concentrate on nurturing Tesco’s nascent recovery.”



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