Stars’ pending conversion of preferred shares challenged in court

By Wendy Van Sickle

Columbus, Ohio, June 13 – Stars Group Inc. has been served with a notice of application filed by Polar Multi-Strategy Master Fund and Verition Canada Master Fund Ltd. in the Ontario Superior Court of Justice regarding Stars’ pending mandatory conversion of all of its outstanding convertible preferred shares, the company said in a press release on Wednesday.

The notice of application seeks, among other things, a declaration of the court that the liquidity condition required for the mandatory conversion be based on the trading volume of Stars’ common shares solely on the Toronto Stock Exchange, as opposed to including trading volume from the Nasdaq Stock Market or any other exchange or trading platform, according to the release.

Stars said the company maintains that the liquidity condition has been met.

The liquidity condition, according to the company, requires the average daily volume on any 20 trading days in a 30-consecutive trading day period to be at least 1.75 million common shares.

Stars said its common shares are cross-listed on Nasdaq as a result of a requirement in the preferred share terms to, within 15 months from the date of issuance of the preferred shares in August 2014, obtain and maintain a second listing on either Nasdaq, the New York Stock Exchange or London Stock Exchange.

The company expects the notice of application to be heard by the court on June 15.

As reported on June 5, the company elected to force the conversion of all of its outstanding convertible preferred shares.

The company said at that time that the conversion right was triggered on May 30 when the common share price and trading volume requirements entitling the company to mandatorily convert the preferred shares into common shares were met.

All of the preferred shares outstanding at the close of business on June 18 will be converted at a rate of approximately 52.66 common shares per preferred share.

Based on the 1,138,978 preferred shares outstanding as of June 5 and assuming no voluntary conversions prior to the mandatory conversion date, the mandatory conversion would result in the issuance of approximately 59.98 million common shares.

The preferred shares were issued on Aug. 1, 2014 at a subscription price equal to C$24.00 per underlying common share in connection with the Stars Group’s acquisition of its Stars Interactive Group online gaming division. The conversion ratio has increased at a rate of 3% every six months since issuance, resulting in incremental common shares issuable to the holders upon conversion.

Stars Group is a Toronto-based provider of technology-based products and services in the gaming and interactive entertainment industries.

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