SCHEDULE: Fairmount Funds Boosts Galecto Stake to 19.99%

Fairmount Funds Management LLC and its affiliates increased their beneficial ownership in Galecto, Inc. to 19.99% following the conversion of Series C Preferred Stock.

Summary

• Fairmount Funds Management LLC and its affiliates, including Fairmount Healthcare Fund II L.P. and Fairmount Healthcare Co-Invest V L.P., now beneficially own an aggregate of 8,713,000 shares of Galecto, Inc. Common Stock.
• This represents 19.99% of the outstanding Common Stock, based on 43,595,335 shares outstanding as of February 9, 2026.
• The increase in ownership is primarily due to the automatic conversion of Series C Non-Voting Convertible Preferred Stock into Common Stock on February 9, 2026, following stockholder approval.
• Fairmount Healthcare Fund II L.P. converted 5,809 shares of Series C Preferred Stock into 5,809,000 shares of Common Stock.
• Fairmount Healthcare Co-Invest V L.P. converted 2,904 shares of Series C Preferred Stock into 2,904,000 shares of Common Stock.
• The conversion of both Series B and Series C Preferred Stock is subject to a beneficial ownership limitation of 19.99% for the holder and its affiliates.
• Fairmount and its affiliates have entered into lock-up agreements with underwriters for Galecto's public offering, restricting the sale or transfer of securities for 60 days following the final prospectus supplement date of February 10, 2026.

Sentiment

Score: 7

Explanation: StockSavvy.ai views this as a moderately positive development, indicating continued strong institutional backing and a structured increase in common stock ownership, though the lock-up temporarily limits liquidity.

Positives

• Increased direct common stock ownership by a significant institutional investor (Fairmount Funds) signals continued confidence in Galecto, Inc.
• Stockholder approval for the conversion of Series C Preferred Stock indicates alignment and support for the company's capital structure adjustments.

Negatives

• The lock-up agreement restricts the reporting persons from selling or transferring their securities for 60 days, limiting their immediate liquidity.

Risks

• Beneficial ownership limitations (currently 19.99%, potentially reducing to 9.99%) restrict the full conversion of preferred stock into common stock, potentially limiting upside for preferred holders if the common stock price rises significantly.
• The 60-day lock-up period prevents the reporting persons from selling shares, which could lead to selling pressure once the lock-up expires if they choose to divest.

Future Outlook

The beneficial ownership limitations with respect to Series B and Series C Preferred Stock will automatically reduce to 9.99% at such time as Fairmount and its affiliates beneficially own 9.0% or less of the outstanding shares of Common Stock.

Industry Context

StockSavvy.ai notes that increased institutional ownership, particularly from specialized healthcare funds like Fairmount, can signal confidence in a biotech company's long-term prospects, especially following a public offering. This move solidifies Fairmount's position as a significant stakeholder in Galecto.

Corporate Governance

Related Party Transactions

• Fairmount Funds Management LLC, Fairmount Healthcare Fund II L.P., Fairmount Healthcare Co-Invest V L.P., Peter Evan Harwin, and Tomas Kiselak are acting as a group in their beneficial ownership of Galecto, Inc. securities.

Stakeholder Impact

• Shareholders: The increased institutional ownership by Fairmount Funds may be perceived as a positive signal of confidence in the company. The lock-up agreement prevents immediate selling pressure from these large holders.
• Creditors: No direct impact mentioned in this filing.

Next Steps

• Expiration of the 60-day lock-up period for the Reporting Persons (approximately April 10, 2026).
• Potential future reduction of beneficial ownership limitations to 9.99% if Fairmount's aggregate beneficial ownership falls to 9.0% or less of outstanding Common Stock.

Key Dates

Recommendation

The filing indicates a significant institutional investor has converted preferred stock into common stock, increasing their direct stake, which is generally a positive sign of confidence. However, the concurrent lock-up agreement means these shares are not immediately available for sale, preventing immediate selling pressure but also limiting the reporting persons' flexibility. Without further operational or financial updates, a 'hold' recommendation is appropriate, acknowledging the positive signal of increased institutional commitment while awaiting more comprehensive company performance data.

Keywords

Galecto, Fairmount Funds, Schedule 13D, beneficial ownership, preferred stock conversion, lock-up agreement, common stock, Series C Preferred Stock, Series B Preferred Stock, institutional investor, equity stake