Tesco will pay $12m in order to settle legal action by US shareholders, which claims that accounting irregularities from the September 2014 scandal inflated the supermarket's share price.
In a statement released this morning, Tesco announced that it had reached an agreement. The class action was against the company and some former directors in relation to alleged breaches of certain US federal securities laws that occurred as a result of the profit overstatement. The settlement agreement, which is subject to confirmation by a federal court in New York, has asked Tesco to pay damages in order to settle the class action with no admission of liability.
This caused Tesco's New York-listed shares down by 15% the following day. Tesco was subsequently forced to raise the estimated overstatement of profits to £263m. This 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.
Shore Capital analyst Clive Black said the latest settlement was "small beer in the big scheme of things... but another example of the distraction that the present management team has had to face from tidying up prior challenges and issues".
“Whilst the devil is in the detail, we deem this development to be another notch of good news, allowing senior management to focus that little bit more on the more important day job of turning this once great business around,” added Black.