Executive Summary: Key Legal and Evidentiary Issues

• Dispute over fair value of minority shares following a merger under British Columbia’s Business Corporations Act (BCBCA) dissent provisions

• Petitioners claimed their shares were worth $0.9847 USD, matching the merger valuation disclosed to regulators and shareholders

• Respondent argued the value was only $0.17 USD, based on the market trading price at the statutory valuation date

• Core legal issue involved interpreting “fair value” in a share exchange transaction between a private and public company

• Competing expert evidence assessed valuation methods, trading market efficiency, and the significance of deal pricing

• The court ultimately accepted the Petitioners’ evidence and ruled that $0.9847 USD per share was the fair value

Facts and outcome of the case

The case involved a shareholder dissent proceeding brought by minority shareholders of TPCO Holding Corp. (TPCO), a cannabis company listed on the NEO Exchange and OTCQX. In 2023, TPCO merged with Old Gold Flora, a privately held California-based cannabis business, under a court-approved Plan of Arrangement. The merger formed a new entity, Gold Flora Corporation.

As part of the Arrangement, minority shareholders of TPCO exercised their dissent rights under the Business Corporations Act of British Columbia, objecting to the valuation of their shares. The Arrangement had assigned a value of $0.9847 USD per TPCO share and $1.50 USD per Old Gold Flora unit, based on a negotiated share exchange ratio. However, following the merger, Gold Flora Corporation valued the dissenting shareholders' TPCO shares at just $0.17 USD per share, claiming that the $0.9847 figure was merely an “implied” or illustrative value derived from the exchange ratio, not an actual fair market valuation.

The Petitioners argued that the $0.9847 per share was the genuine negotiated value, publicly disclosed in regulatory filings, fairness opinions, and communications to shareholders. They emphasized that the merger was negotiated at arm’s length, supported by detailed due diligence and fairness opinions from independent financial advisors. These opinions, while not formal valuations, relied on financial metrics consistent with the stated share price.

The court reviewed the entire record, including the Strategic Process undertaken by TPCO, which involved seeking various potential transactions and maximizing shareholder value. The court found that the transaction was not a merger of equals, as the respondent suggested, but rather more akin to an auction process where TPCO negotiated with multiple parties before selecting the best offer. The $0.9847 value was not incidental but central to the negotiation and approval of the merger.

Significant weight was placed on expert evidence, particularly that of the Petitioners’ experts, who showed that TPCO’s trading market was not efficient due to low liquidity, irregular price movements, and investor inattention. This undermined the Respondent’s reliance on market trading prices to define fair value. Moreover, the court found the expert comparables and valuation models used by the Petitioners more reliable than those presented by the Respondent, whose comparables included companies with nil revenue and reporting deficiencies.

The court also considered the convertible debentures issued by Old Gold Flora, noting that the share value was tied to the conversion ratio, adding further credibility to the $0.9847 valuation. TPCO’s public disclosures to the U.S. Securities and Exchange Commission (SEC), including in its Form 10-K and Form 10-Q, also confirmed the $0.9847 value, which carried legal significance under U.S. securities law prohibitions on material misstatements.

The court concluded that the negotiated and disclosed value of $0.9847 USD per share represented the fair value of TPCO shares as of the statutory valuation date, June 15, 2023. This figure accounted for the full value of the shares on an en bloc basis, ignoring minority discounts but including a control premium. The Petitioners were awarded this amount as the payout for their dissenting shares.

The court awarded the Petitioners pre-judgment and post-judgment interest under the Court Order Interest Act and fixed costs at Scale C due to the complexity and importance of the matter. The exact amounts of interest and costs were left to further submissions or determination by the Registrar if needed.