After shareholders lose £1.1bn from finance gaffe…Now Metro Bank is facing investor lawsuit
Metro Bank is facing a legal assault from furious investors after an accounting error wiped £1 billion off its stock price.
The bank is being targeted by Therium, a heavyweight funding firm which bankrolls major lawsuits by disgruntled investors.
Therium is reviewing a 46 per cent crash in the lender’s stock price since it revealed a mistake over how it calculates risky loans.
In the firing line: Metro Bank chief executive Craig Donaldson is under growing pressure to quit
This fall was made even worse when the Mail revealed that chief executive Craig Donaldson may have misled markets by suggesting the problem was uncovered through an internal review – when it was actually spotted by Bank of England regulators.
Therium is poised to launch a case against Metro which would see it hire lawyers and sign up aggrieved shareholders for a class action.
Neil Purslow, chief investment officer of Therium, said: ‘We are looking at providing funding support for Metro Bank shareholders who want to bring a claim against the bank.
‘Amongst other things, we need to establish the extent of any wrongdoing and whether the market was misled.’
Legal circles are awash with speculation that Metro is headed for a battle which could ultimately end up in the courts.
One partner at a leading firm said his team is closely examining the case so it is ready to act if called on. And one investment company is understood to be preparing to instruct solicitors.
Any case is likely to centre on whether management is at fault for the share price crash, which included the biggest one-day drop seen in British banking since the financial crisis.
Metro revealed that it had underestimated the risk of some commercial and buy to let property loans, meaning it has to set aside more cash to guard against the risk they will go sour.
It is feared this will force the bank to tap up its investors for another £300m, on top of the £553m it raised from shareholders and debt markets in 2018.
Donaldson is under growing pressure to quit, with MPs and his own shareholders warning the bank may need a new boss.
One top 20 investor told the FT: ‘It’s a pretty untenable situation. There has to be some accountability. That would normally be the chief executive.’
Another major fund manager said: ‘There has to be a new chief executive. The regulator spotted this, but now they need to follow through.’
Ashley Hamilton Claxton, of City firm Royal London, is seeking to discuss what has happened with management.
Therium – which stumps up the cash for complainants to launch expensive City lawsuits, then takes a cut of the damages if they win – is already involved in some of the City’s biggest legal fights.
It is funding financier Amanda Staveley in a blockbuster £700m row with Barclays over whether the bank mistreated her clients in a 2008 fundraising drive. Therium is also behind a group of shareholders suing Lloyds for £600m over its botched handling of the 2008 takeover of rival HBOS.
Metro declined to comment. Shares rallied 10.4 per cent, or 113p, to 1200p yesterday after a week of heavy falls.