SCHEDULE: Star Equity Proposes GEE Group Merger

Star Equity Holdings, a 5.4% shareholder, has publicly proposed a merger with GEE Group, citing operational inefficiencies and a desire to unlock shareholder value.

Summary

• Star Equity Holdings, Inc. (STRR) and its affiliates, collectively holding 5.4% of GEE Group Inc. (JOB) common stock, have publicly proposed a merger.
• Star Equity believes a merger would significantly benefit GEE Group stockholders by reducing duplicative public company and corporate overhead costs, and sharpening operational focus.
• Star Equity is willing to pay a meaningful premium to GEE Group's December 31, 2025 closing stock price of $0.1953.
• The proposal would be funded through a combination of cash on hand, debt, and equity securities, subject to due diligence and a definitive agreement.
• Star Equity has repeatedly attempted to engage GEE Group's management and board regarding the proposal but has received no response or acknowledgment.

Sentiment

Score: 3

Explanation: The filing presents a highly critical view of GEE Group's financial performance, management strategy, and stock price performance, while proposing a merger as a solution. The sentiment is negative towards GEE Group's current state but positive regarding the potential for value creation through Star Equity's intervention.

Positives

• Star Equity is willing to pay a meaningful premium to GEE Group's December 31, 2025 closing stock price of $0.1953.
• A merger could eliminate duplicative public company costs and reduce SG&A expenses for GEE Group.
• Star Equity's management has significant experience in overseeing and investing in professional services businesses, which could improve GEE Group's operational focus and efficiency.
• The proposal aims to unlock stockholder value for GEE Group's "long-suffering stockholders."

Negatives

• GEE Group's revenue in FY 2025 was $96.5 million, a 41.6% decline from its FY 2022 peak and a 9.8% decline from FY 2024.
• GEE Group reported net losses totaling $58.8 million over the last two years combined.
• GEE Group incurred $36.2 million in goodwill impairment charges, indicating overpaying for previous acquisitions.
• GEE Group's stock price has declined almost 92% from its level five years ago and has traded near its cash per share since April 2025.
• GEE Group's CEO, Derek Dewan, stated a preference for acquisitions over share repurchases, despite private staffing company acquisitions typically transacting at 6x-10x EBITDA, which Star Equity believes would be "meaningfully destructive to JOB stockholder value."
• GEE Group's management and board have been unresponsive to Star Equity's merger proposal.

Risks

• Tangible risk of GEE Group further eroding its cash balance through continued corporate overhead expenses, public company costs, and compensation for management and board.
• Significant risk of GEE Group pursuing dilutive and misguided acquisitions.
• Market concern over GEE Group's financial performance, capital allocation, and cash management, as signaled by prolonged stock price underperformance.
• Goodwill impairment charges totaling $36.2 million indicate a risk of overpaying for previous acquisitions.

Future Outlook

Star Equity intends to review its investment in GEE Group on a continuing basis and may take further actions, including engaging in additional communications, discussions with shareholders, making proposals concerning capitalization, ownership, board structure, operations, or potential business combinations. They also may purchase or sell additional shares, or engage in hedging transactions.

Management Comments

• "We believe strongly that becoming part of a larger entity is the best way to increase value for GEE Group's long-suffering stockholders." Star Equity Holdings, Inc.
• "Remaining a very small public company would be a poor outcome for JOB stockholders due to GEE Group's high SG&A expenses, including public company costs, as a percentage of revenue." Star Equity Holdings, Inc.
• "GEE Group wants to be a buyer, but it should be a seller." Star Equity Holdings, Inc.
• "GEE Group will not pursue share repurchases, citing, instead, a preference for acquisitions." Mr. Derek Dewan, GEE Group CEO (Q4 2025 earnings call).
• "Private staffing company acquisitions typically transact at multiples of 6x-10x EBITDA – a valuation range that would be meaningfully destructive to JOB stockholder value." Mr. Derek Dewan, GEE Group CEO (as quoted by Star Equity).
• "We strongly urge GEE Group's board to consider our Proposal and instruct GEE Group's management to engage in constructive discussions with Star Equity." Star Equity Holdings, Inc.

Industry Context

The filing highlights challenges in the staffing industry, particularly for smaller public companies like GEE Group, facing declining revenues and high overhead. Star Equity's proposal suggests a trend towards consolidation to achieve cost efficiencies and improved operational focus, especially in professional services. The critique of GEE Group's acquisition strategy at high multiples reflects broader market scrutiny on capital allocation in industries with fluctuating performance.

Comparison to Industry Standards

• GEE Group's high SG&A expenses, including public company costs, as a percentage of revenue are presented as a negative compared to what a larger entity could achieve through consolidation.
• The typical valuation range of 6x-10x EBITDA for private staffing company acquisitions, as acknowledged by GEE Group's CEO, is highlighted by Star Equity as potentially "meaningfully destructive" to GEE Group's shareholder value, implying GEE Group's current strategy is out of step with prudent capital allocation.
• Star Equity's own "significant experience in overseeing professional service businesses" is presented as a benchmark for improved operational focus and efficiency compared to GEE Group's current performance.

Corporate Governance

Stakeholder Impact

• Shareholders (GEE Group): Potential for significant value increase if the merger proceeds at a premium, or continued underperformance if the proposal is rejected. Star Equity explicitly states the proposal would "significantly benefit JOB stockholders."
• Management and Board (GEE Group): Increased scrutiny and pressure to respond to Star Equity's proposal. Potential for changes in roles or composition if a merger occurs.
• Employees (GEE Group): Potential for operational restructuring and cost-saving synergies, which could impact employment.
• Customers and Vendors (GEE Group): Potential for discussions during due diligence, and possible changes in business relationships post-merger.

Next Steps

• Star Equity suggests putting a mutual NDA in place with GEE Group.
• Star Equity anticipates conducting standard due diligence on GEE Group's financial, operating, and legal information.
• Star Equity will seek Board approval to consummate the transaction, subject to due diligence, negotiation, and execution of a definitive agreement.
• Star Equity may engage in additional communications with GEE Group's management and board.
• Star Equity may engage in discussions with GEE Group's shareholders and others about its investment.
• Star Equity may make proposals concerning GEE Group's capitalization, ownership structure, board structure, operations, or potential business combinations.
• Star Equity may purchase additional shares, sell some or all of its shares, or engage in short selling or hedging.

Key Dates

Recommendation

Star Equity, a significant shareholder, is proposing a merger at a "meaningful premium" to GEE Group's recent stock price. This activist engagement, coupled with the detailed critique of GEE Group's underperformance and the potential for a premium acquisition, suggests a "buy" recommendation for GEE Group shares based on the likelihood of a positive outcome for shareholders if the merger or other strategic alternatives are pursued. The current low valuation and the potential for a premium offer create an attractive risk/reward profile.

Keywords

GEE Group, Star Equity Holdings, Merger Proposal, Schedule 13D, Activist Investor, Shareholder Value, Acquisition, Staffing Industry, Corporate Governance, STRR, JOB