A recent B.C. Supreme Court decision offers advisors a powerful reminder that in a takeover, a stock’s trading price isn’t always the fair value your clients are owed. In Michalowski (Trustee) v. Gold Flora Corporation, the court awarded dissenting shareholders an impressive 480% premium over the company’s trading price.
The decision emphasizes how shareholder dissent rights can unlock significant value, especially in deals involving thinly traded companies.
In 2023, a B.C.-incorporated cannabis company called TPCO merged with a private entity, Gold Flora LLC. A group of minority TPCO shareholders felt the deal undervalued their stake and exercised their dissent rights, asking the court to determine the payout value for their shares.
The company argued fair value was its trading price of around $0.17 on the valuation date. The court disagreed, landing on the much higher negotiated deal price of $0.9847.
That figure wasn’t an arbitrary number, the court found. It was a core part of the deal’s public story.
From the beginning, TPCO’s press releases, shareholder circular and even its official Securities and Exchange Commissionfilings stated that the transaction valued TPCO at $0.9847 per share, and Gold Flora at $1.50 per unit.
The judge noted that under U.S. securities law, these statements couldn’t be misleading. That made them powerful evidence of the company’s own view of its value.
Furthermore, this value was backed by a seemingly robust process. TPCO’s board had obtained two fairness opinions that used the $0.9847 per share value as an anchor for their analysis. This showed it was a negotiated, arm’s-length price — not just a number plucked from thin air.
The company’s argument for the $0.17 trading price fell flat because the court concluded that TPCO was not trading in an efficient market. This is a crucial point for advisors with clients in cannabis, junior mining or other sectors prone to low liquidity and over-the-counter (OTC) trading; noise-trader activity where prices move irrespective of news; and unreliable peer comparisons used by valuation experts.
The court found that these factors made the stock chart an unreliable proxy for the company’s true en bloc (or whole) value.
Fair value in a dissent case may also include a control premium, which the judge determined was not baked into the inefficient trading price. The negotiated $0.9847 figure, however, sat comfortably within a fair-value range once a control premium was factored in.
Four takeaways
This case highlights several scenarios where dissent rights can be a powerful legal tool.
- Stated value matters. If a company’s own press releases and circulars repeatedly state a specific per-share value for a deal, courts may hold them to it. Scrutinize those documents carefully — they may be a crucial piece of evidence.
- Thin trading can be an opportunity. For clients invested in companies with low trading volumes or OTC listings, the market may be inefficient. An inefficient market can be a strong foundation for a dissent claim.
- Look beyond the ticker. The court recognized that TPCO’s significant cash reserves ($80 million minimum) and its public listing status were valuable assets not reflected in the daily stock price. These assets can be key to arguing for a higher valuation.
- Process is paramount. The court paid close attention to the special committee’s process and the quality of the expert reports. A well-documented, arm’s-length negotiation strengthens the case that a stated deal price is the fair price.
Michalowski confirms that fair value is a broad, evidence-driven inquiry — not just a snapshot of the stock market.
For advisors, it’s a reminder to proactively flag dissent rights when clients face a takeover. If the trading price looks low and the deal documents tell a story of higher value, your clients may have a strong case for a better outcome.