THE PROBLEMS at crisis-hit supermarket giant Tesco deepened today as its second largest shareholder, US investment firm BlackRock, offloaded a big chunk of its stake in the supermarket group.
Days after the stricken retailer announced that it had overstated its profits by £250m, BlackRock revealed in a statement issued to the London Stock Exchange that it now owns under 5% of Tesco’s stock.
In a separate broadside, rating agencies Standard & Poor’s and Moody’s have both announced they would put Tesco’s creditworthiness under review.
On Thursday, Adrian Bailey, chair of the House of Commons’ parliamentary business committee, told BBC Radio 5 Live that it may ask Tesco executives to explain its £250m overstatement of first-half profits, wiping £2bn off its value.
Bailey dubbed Tesco’s overstatement a “stratospheric error”.
“We may well as a committee want to look at this. Not just at Tesco but at what is going on in the retail industry and in the relationship with the suppliers to see if the issues we came across two years ago are still there,” he said.
Earlier this week, the FRC announced it was “closely monitoring the situation” unfolding at Tesco. The UK accounting watchdog joined the Serious Fraud Office and City regulator, the Financial Conduct Authority, in officially announcing that it too was keeping a close eye on the unfolding supermarket drama.
Yesterday, the FRC confirmed that Mark Armour, one of Tesco’s non-executive directors who sits on the watchdog’s board, would not be party to any of the body’s discussions or probes into the £250m accounting black hole.
The FRC has the power to compel companies to restate their accounts and punish auditors for any oversight. It said it would make a decision on whether to take action once Tesco had finished its own investigation, led by Deloitte and its external legal advisor, Freshfields.
Tesco shares have now halved in value over the past 12 months.
However, Sports Direct today said , it had made a “put option” on 23 million Tesco shares – essentially a vote of confidence in the supermarket group’s share price rising.