Patisserie Valerie: Will it rise to the challenge of staying in the market?

November 20, 2018

2 min read

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What's going on here?

Patisserie Valerie is fighting off closure after  “accounting irregularities” are discovered.

What does this mean?

Patisserie Valerie is a chain specialising in selling cakes.  It opened in 1926 and has 206 stores across the UK as of May 2018.  Recently Her Majesty’s Revenue and Customs (the government’s arm responsible for the collection of taxes) filed a winding up petition against Stone Beach, a subsidiary of the company.  A winding up petition forces the closure of a company when they cannot pay their debts.  Although the company’s stock was selling like hot cakes, after discovering the amount owed to HMRC (a shortfall of over 20million and a secret overdraft) they are in serious need of an injection of cash… Queue super hero Luke Johnson (the company’s executive chairman and major shareholder) – who lent £20 million to keep them afloat. But was this a half-baked scheme?

What's the big picture effect?

This highlights how company law operates on a large scale and illustrates the relationships between investors, shareholders and the behaviours they exhibit when a company faces a winding up order. Here, potential investors will be reluctant to inject cash into the company due to the irregularities in the accounts and no true picture of the finances.  Those who are current investors may face a decrease in value of their shares if other investors “dump their stock” (which means selling off large amounts of stock for whatever market price they can get).

However, this case is not just important for investors but also for firms working in the field of fraud.  Chris Marsh, the chain’s finance chief executive, has been arrested and released on bail for fraud by false representation.  This arrest came after the bakery chain hired legal and financial experts to oversee their accounts, demonstrating the need for solicitors in every aspect of the business world.

Whether you believe Patisserie Valerie will survive or not, my advice would be to get yourself to the nearest bakery before its too late!

Report written by Rianna Lee

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