Tesco Dodges a Bullet - £129m Fine to Avoid SFO Prosecution and £90m Compensation

Companies / Tesco Mar 28, 2017 - 07:43 AM GMT

Britain's largest retailer, near triple the size of its nearest competitor Sainsbury manages to dodge a bullet by being fined £129m as part of a DPA (Deferred Prosecution Agreement) with the SFO (Serious Fraud Office) for its 2014 false accounting scandal.

Which means that Tesco avoids a formal prosecution and that the fine+ investor compensation is about half what it could have been with some estimates ranging as high as £500m, perhaps the SFO took Tesco's distressed state into consideration as the super market giant had been in meltdown, it's stock price having collapsed by 60% from its high and having lost £10 billion in annual revenues to it's competitors.

Whilst holders of Tesco shares have been compensated to an estimated £90m (including interest) for those who bought shares on the basis of false accounting in 2014. Thus Tesco is taking an approx hit of £220m today.

At £1.89 the Tesco share price is trading at LESS than 50% of its 2013 high. That's a 50% LOSS of stock market value over the past 4 years, valuing the super market giant today at approx £15bn. Whilst today's fine + investor compensation coming in at the lower end of estimates should give the Tesco stock price a short-term bounce. However, for Tesco's longer-term prospects see my recent video -

Whilst my previous video in this series explained why the UK retail sector faces a perfect storm of rising prices, falling consumer disposable earnings and haemorrhaging customers to the discounters, that could even result in a Woolworth's moment...

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By Nadeem Walayat

http://www.marketoracle.co.uk

Nadeem Walayat has over 25 years experience of trading derivatives, portfolio management and analysing the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem's forward looking analysis focuses on UK inflation, economy, interest rates and housing market. He is the author of five ebook's in the The Inflation Mega-Trend and Stocks Stealth Bull Market series that can be downloaded for Free.

Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication that presents in-depth analysis from over 1000 experienced analysts on a range of views of the probable direction of the financial markets, thus enabling our readers to arrive at an informed opinion on future market direction. http://www.marketoracle.co.uk

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