SCHEDULE: Great Elm Group Delays PIK Note Conversion, Averting Dilution

Great Elm Group's major shareholders agree to delay the conversion of $8.3 million in convertible notes, preventing immediate dilution of common stock.

Summary

• Reporting persons, including Imperial Capital Asset Management, Long Ball Partners, Imperial Capital Group Holdings II, and CEO Jason Reese, collectively hold significant beneficial ownership in Great Elm Group, Inc.
• Jason Reese, the CEO and Chairman, beneficially owns 7,372,765 shares, representing 22.3% of the common stock, including shares with waived voting rights and restricted stock vesting within 60 days.
• Long Ball Partners, LLC, a reporting person, holds an aggregate principal amount of $8,333,667.00 in 5.0% Convertible Senior PIK Notes Due 2030.
• On September 8, 2025, Long Ball entered into a Forbearance Agreement with Great Elm Group, Inc., agreeing to irrevocably forbear from converting these PIK Notes into common stock until November 10, 2026.
• This agreement prevents the immediate issuance of 2,400,111 shares of common stock that would otherwise be convertible from the PIK Notes.
• The beneficial ownership percentages are based on 32,996,787 shares of Common Stock outstanding as of August 27, 2025.

Sentiment

Score: 6

Explanation: The delay in dilution is a positive for existing shareholders as it removes immediate selling pressure from new shares. However, the recurring nature of these forbearance agreements and the underlying convertible debt indicate ongoing capital structure management, which could be viewed with caution.

Positives

• The Forbearance Agreement delays potential dilution of 2,400,111 shares of common stock, which could support the current share price by reducing immediate supply pressure.
• The agreement demonstrates a coordinated effort by significant shareholders and management to manage the company's capital structure.

Negatives

• The continued existence of convertible PIK Notes represents a future potential for dilution, even if delayed.
• The need for repeated forbearance agreements (this is the third) might indicate ongoing challenges in managing the company's debt and equity structure.

Risks

• Future dilution risk from the conversion of PIK Notes after the Forbearance End Date (November 10, 2026), or if the agreement is not extended.
• The company's reliance on PIK Notes and the need for forbearance agreements could signal underlying financial or operational challenges that make equity financing difficult or undesirable at current valuations.

Future Outlook

The Forbearance Agreement delays potential dilution from the conversion of PIK Notes until at least November 10, 2026, providing a temporary reprieve from an increase in the outstanding share count. The Forbearance End Date may be extended by Long Ball with the Issuer's prior written consent.

Management Comments

• Jason Reese, Chairman & CEO of Great Elm Group, Inc., signed the filing on behalf of all reporting persons, indicating his central role in these capital structure decisions.

Industry Context

This filing is specific to Great Elm Group's capital structure management. While convertible notes are common, repeated forbearance agreements can signal a company's efforts to manage its equity base and avoid dilution, which is a common theme in companies navigating growth or financial restructuring.

Comparison to Industry Standards

• NA

Related Party Transactions

• Long Ball Partners, LLC, a reporting person and entity associated with Jason Reese (CEO and Chairman of the Issuer), entered into a Forbearance Agreement with Great Elm Group, Inc. regarding the conversion of PIK Notes.

Stakeholder Impact

• Shareholders: Potential positive impact by delaying dilution of common stock, which could support share price stability in the short to medium term.
• Creditors (PIK Note holders): Long Ball (as a PIK Note holder) is agreeing to delay its right to convert, which might be part of a broader strategy to maximize value for all stakeholders, including itself.

Next Steps

• The Forbearance Agreement is in effect until November 10, 2026, after which the PIK Notes could become convertible.
• Long Ball may extend the Forbearance End Date with the Issuer's prior written consent.

Key Dates

Keywords

Great Elm Group, GEG, Schedule 13D, beneficial ownership, convertible notes, PIK notes, dilution, forbearance agreement, Jason Reese, Imperial Capital, capital structure