Ontario Court Dismiss Complaints Over Stars Group’s Shares

It sometimes happens that certain accounting practices, although perfectly legal, cause a lot of problems for all sides involved and affected by the share value of a particular company.

The Canadian online poker and gaming company Stars Group knows what we’re talking about since it’s the latest enterprise to have had serious problems due to this potentially very hazardous phenomena.

The situation is even more confusing because of one small fact: it was caused by the Stars Group itself, which allowed a number of share conversion options for its employees, options related to the ownership of the company’s shares.

The Stars Group survives following the court’s decision

So what actually happened?

The aforementioned options were used by the Stars Group’s employees during the 2017 financial year but were never accounted for in the company’s reports. Due to this error – no matter whether it was intentional or not – the yearly results were increased by one-fifth since the compensation expense wasn’t part of the whole calculation.

At this point, you’re starting to get the idea of how serious the whole situation can be. Concerned shareholders Polar Multi-Strategy Master Fund and Verition Canada Master Fund Ltd filed a complaint against the Stars Group, worried by what will happen to all those unconverted shares.

The good news for the Stars Group is that the Ontario Superior Court of Justice has dismissed the complaint since the conversion of all preferred shares is directly in conflict with the company’s articles of continuance. Commenting on the court’s decision, the group’s governance has expressed their satisfaction, stating the mandatory conversion would cause serious problems for the Toronto-headquartered business.

Experts were unanimous the mandatory conversion would put the company in a situation that could cause a severe and almost insuperable problem for its operations.

What Now?

Following the court’s ruling, all of the preferred shares will be converted into common shares. Such a move will without a doubt have a significant impact on the group’s balance sheet and its overall financial appeal since common shareholders will be able to pay dividends, but not before preferred shareholders are paid out.

Preferred shareholders have far more privileges than common shareholders since the latter represents a mere form of equity ownership or a form of security to be more precise. More importantly, preferred shareholders have greater financial benefits.

One thing is certain, though. If the decision of the Ontario Superior Court of Justice had been different, and if the shares had been converted as fund administrators planned, the online gaming giant wouldn’t have survived the process.

The Stars Group was founded in 2001 as Amaya Inc but changed its name to The Stars Group Inc. on August 1, 2017. Today, the Toronto-headquartered company owns some of the industry-leading gaming brands such as PokerStars, PokerStars Casino, BetStars, Full Tilt, and the PokerStars Live brands, and through its ownership of Sky Betting & Gaming, a mobile-led leading online gaming operator, licenses the Sky Bet, Sky Vegas, Sky Casino, Sky Bingo and Sky Poker online gaming brands.