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Tesco settles US lawsuit over profit overstatement | Tesco settles US lawsuit over profit overstatement |
(about 3 hours later) | |
Tesco will pay $12m (£8m) to settle legal action by US shareholders which claimed that accounting irregularities inflated the supermarket's share price. | Tesco will pay $12m (£8m) to settle legal action by US shareholders which claimed that accounting irregularities inflated the supermarket's share price. |
The lawsuit alleged that Tesco's overstatement of its profits guidance, revealed last year, breached certain US securities laws. | The lawsuit alleged that Tesco's overstatement of its profits guidance, revealed last year, breached certain US securities laws. |
The cash settlement was disclosed on Wednesday in the US District Court in Manhattan and requires court approval. | The cash settlement was disclosed on Wednesday in the US District Court in Manhattan and requires court approval. |
Tesco, the UK's largest supermarket group, has not admitted any liability. | Tesco, the UK's largest supermarket group, has not admitted any liability. |
The retailer said in September 2014 it had overstated its profit guidance for the first half of the year by £250m after incorrectly booking payments from suppliers. | The retailer said in September 2014 it had overstated its profit guidance for the first half of the year by £250m after incorrectly booking payments from suppliers. |
The announcement sent Tesco's New York-listed shares down by 15% the following day. American Depositary Receipts (ADRs) account for about 2% of Tesco shares. | The announcement sent Tesco's New York-listed shares down by 15% the following day. American Depositary Receipts (ADRs) account for about 2% of Tesco shares. |
Tesco later raised the estimated overstatement of profits to £263m. | Tesco later raised the estimated overstatement of profits to £263m. |
The incident led to an investigation by the Serious Fraud Office and other regulators. | The incident led to an investigation by the Serious Fraud Office and other regulators. |
The legal action claimed that Tesco had misled investors about its financial health. | The legal action claimed that Tesco had misled investors about its financial health. |
Kim Miller, a partner at Kahn Swick & Foti, called the settlement an "outstanding recovery". | Kim Miller, a partner at Kahn Swick & Foti, called the settlement an "outstanding recovery". |
The average recovery will be 37 cents per ADR before fees and expenses of about 30%, court papers showed. | The average recovery will be 37 cents per ADR before fees and expenses of about 30%, court papers showed. |
Tesco shares, which are down almost 10% this year, rose 1.5% to 171.1p in morning trading on Thursday. | |
Analysts at Shore Capital maintained their "hold" recommendation on the stock. | |
"We believe that chief executive Dave Lewis and his team deserve considerable credit for the way in which they have stabilised an organisation in a state of chaos - the settlement of class actions in the USA merely serving to remind us of the challenges that management have faced over the last year," they said in a note. |
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