Tesco PLC announced on 28 March 2017 that they have agreed with the FCA (under its statutory powers) to establish a compensation scheme for certain shareholders and bondholders to be administered by KPMG (“the Scheme”).
The Scheme is being set up in connection with Tesco’s Trading Statement of 29 August 2014 regarding their profit outlook for 14/15. It was corrected on 22 September 2014.
As a result, Tesco will pay compensation to certain purchasers of Tesco shares and bonds in the period from 29 August to 19 September 2014
The Scheme will compensate:
- Net cash purchasers of Tesco ordinary shares between 29 August 2014 to 19 September 2014 (both dates inclusive). If someone purchased more shares than they sold during the period 29 August to 19 September 2014, they will be a net purchaser.
- Net purchasers of certain Tesco listed bonds between 29 August 2014 to 19 September 2014, (both dates inclusive). If someone purchased more bonds than they sold during the period 29 August to 19 September 2014 they will be a net purchaser.
- The Scheme only compensates net purchasers where there is a genuine economic loss – so where the loss was mitigated by hedging it will not be eligible.
The amounts to be paid per net share purchase and per net bond purchase have been determined by the FCA. Each net purchaser of shares will be entitled to compensation of 24.5p per share purchased, plus interest at 1.25% per annum if the net purchaser is an institutional investor or 4% per annum if the net purchaser is a retail investor, in each case with such interest running from 19 September 2014 until 120 days after the Scheme commences. Varying amounts are payable in respect of each relevant bond issue, again together with interest. The compensation is based on the difference in price of the relevant shares and bonds between market close on Friday, 19 September 2014 and the market close on Monday, 22 September 2014 after Tesco PLC had announced in the morning of Monday, 22 September 2014 that it had identified an overstatement of its expected profit. It has been further adjusted for other industry-wide effects on the market and is intended to compensate investors who purchased shares and bonds at a time when the price was inflated by Tesco PLC’s Trading Statement of 29 August 2014.
KPMG has been appointed to prepare to be the Administrator of the Scheme and we are currently working to set up the necessary systems and processes so it will run smoothly when launched. As part of this role, we shall seek to contact eligible claimants to enable them to bring their claim.
Further announcements will be made in respect of the opening and operating of the Scheme in due course. We expect to have completed the preparations required to open and operate the Scheme before the end of August 2017.
More detail about the Scheme, and how claims can be made, will be provided nearer the launch date. Unfortunately neither we nor Tesco PLC will be able to answer any specific questions about individual circumstances at this time but when the Scheme launches, we will be able to assist.
When the Scheme opens, to make a claim you will need to provide evidence showing that you purchased Tesco shares or relevant bonds during the period 29 August 2014 to 19 September 2014. You will also need to provide evidence of any sales of Tesco shares or relevant bonds in this period. If you do not have records to hand, you may need to contact your broker to ask them to provide you with evidence of your transactions. Relevant evidence would include, for example, relevant monthly statements from around August and September 2014; and contract notes or exchange reports.
If your purchase of Tesco shares or relevant bonds hedged an exposure under derivatives such as (for example) contracts for differences or spread bets, you will also need to provide evidence of the relevant derivative transactions. Similarly, if your purchase of shares was hedged by derivative transactions during the period 29 August 2014 to 19 September 2014, you will need to provide evidence of them. When the Scheme opens, claimants will only have six months to submit a claim, so you should get your evidence ready now, to make sure you can submit your claim in time. All claimants who put in an eligible claim will receive interest from 19 September 2014 to 120 days after the Scheme commences, even if their claim is determined earlier - or later - than this. Therefore there is a real benefit in claimants putting in their claim as early as possible.
In the meantime please refer to the Scheme FAQs and the Tesco Scheme Terms provided on the FCA website - https://www.fca.org.uk/publication/final-notices/tesco-2017.pdf.