Investors have launched a £100 million law suit against supermarket behemoth Tesco.
A group of 124 funds, all with Tesco shares, have started legal action because they say they lost large sums of money when the firm became embroiled in a profit inflation scandal two years ago.
Tesco was found to have inflated its profits by a staggering £326 million when it released deliberately misleading figures in 2014.
Since then, its shares have decreased in value by a fifth. Now, investors say they are entitled to compensation to recoup their lost money.
Jeremy Marshall is the chief investment officer at Bentham Europe, which is funding the legal action. He claims that misstating profits created a chain reaction which led to significant losses for shareholders.
“The misstatement of profits, leading to a dramatic collapse in the Tesco share price, caused substantial damage to many shareholders who manage money for thousands of investors,” he explained.
He said investors should have the right to rely on statements made by companies so they can then decide where their capital should lie.
The legal action will centre around claims that by misstating profits, Tesco breached its obligations under the Financial Services and Markets Act.
Since the scandal hit, three former Tesco bosses have been charged with fraud by abuse of position and false accounting, by the Serious Fraud Office (SF0).
Carl Rogberg, 49, Chris Bush, 50, and John Scouler, 48, who respectively held the positions of finance director, managing director, and commercial director, are facing allegations that they failed to correct income figures that had been inflated to the tune of £326 million.
All three men deny the charges and are set to stand trial in autumn next year.
The SFO has not ruled out bringing charges against more individuals connected to Tesco.
The new action comes following an investigation by the supermarket watchdog which concluded that the supermarket had deliberately and repeatedly withheld cash owed to suppliers in order to make its own sales figures look better.
Officials at the Groceries Code Adjudicator, which looks into wrongdoing within the industry, also found that Tesco asked for extra money from suppliers, giving them more control over where their products sat on the supermarket shelves in return.
Tesco is currently the market leader in the UK, with a market share of around 28 per cent.