Patisserie Valerie, a cafe chain, is likely to face legal action from its shareholders over the £40 million black hole that was discovered in its accounts.
Philip Rubens, a lawyer from the firm Teacher Stern, is canvassing institutional shareholders and claims to be on the brink of securing third-party funding.
He is striving to make a claim against the AIM-listed company for losses that were endured by the shareholders after the firm announced the discovery of “significant, and possibly fraudulent, accounting irregularities” earlier in October.
Currently, the shares of the company are frozen while it awaits the findings of the investigative auditors from PricewaterhouseCoopers, who are trying to determine the source of a series of major discrepancies in its accounting.
Chris Marsh, its suspended finance director, was arrested and released on bail without charges. The Serious Fraud Office (SFO) has said that it is investigating on the matter.
Rubens is the head of financial services litigation at Teacher Stern. He said that he had received interest from various institutional shareholders, and also anticipated to hear from retail investors who had taken shares in the firm for tax avoidance purposes.
He said that it was difficult to speculate over the outcome at this stage, however, he said that he believed that press reports revealed that the investors had been “misled.”
The revelation of financial discrepancies at the company shows that it is less profitable as compared to what previous reports had suggested.
The auditor of Patisserie Valerie, Grant Thornton, is likely to face scrutiny over its assessment of the accounts of the firm in the run-up to the revelations regarding its finances. A spokesperson for Grant Thornton said that it was aware of issues, however, he could not comment further due to confidentiality.
Two weeks ago, the chain was saved from collapse after Luke Johnson, its chairman and one of the best-known entrepreneurs in the United Kingdom, gave it a £20 million cash lifeline as a loan to cover its outstanding liabilities, and shareholders agreed to undertake a massively-discounted share sale.