SCHEDULE: Great Elm Group Investors Forbear Debt Conversion

Great Elm Group's significant noteholders have agreed to extend a forbearance on converting debt to equity until November 2027, impacting potential share dilution.

Summary

• This filing is an amendment to a Schedule 13D, reporting changes in beneficial ownership of Great Elm Group, Inc. common stock.
• The primary update concerns a forbearance agreement between Long Ball Partners, LLC and Great Elm Group, Inc.
• Long Ball Partners, holding $8,755,560.00 in 5.0% Convertible Senior PIK Notes Due 2030, has agreed not to convert these notes into common stock until November 10, 2027.
• This forbearance impacts 2,521,617 shares of common stock that would otherwise be convertible.
• The reporting persons include Imperial Capital Asset Management, LLC, Long Ball Partners LLC, Imperial Capital Group Holdings II, LLC, and Jason Reese (CEO and Chairman of the Issuer).
• Jason Reese's beneficial ownership is reported at 7,252,754 shares, representing 23.3% of the class, including shares with waived voting rights and those subject to vesting within 60 days.
• The outstanding shares of common stock as of August 20, 2026, were reported as 31,094,890.

Sentiment

Score: 3

Explanation: StockSavvy.ai views this as a neutral to slightly negative filing, primarily due to the forbearance agreement which delays potential conversion of debt into equity, indicating potential financial strain or strategic maneuvering by the company.

Positives

• The forbearance agreement provides a period of stability by preventing immediate conversion of a significant amount of debt into equity, thus avoiding immediate dilution.
• Jason Reese, CEO and Chairman, maintains a substantial beneficial ownership of 23.3% of the company's common stock.

Negatives

• The forbearance agreement indicates a potential need for the company to manage its debt obligations and avoid immediate share dilution, possibly due to financial pressures.
• The delay in conversion of PIK Notes until November 10, 2027, postpones a potential increase in the company's outstanding share count but also signals ongoing financial considerations.

Risks

• The need for a forbearance agreement on convertible notes suggests potential financial challenges or strategic considerations that could impact the company's financial health.
• The potential for future dilution exists if the PIK Notes are converted after the forbearance period ends.
• The company's reliance on debt financing and the terms associated with its conversion present ongoing financial risks.

Future Outlook

The forbearance agreement defers the potential conversion of $8,755,560.00 in PIK Notes into 2,521,617 shares of common stock until November 10, 2027. The extension of this forbearance may be further extended by Long Ball Partners with the Issuer's consent. The company's future outlook is influenced by its ability to manage its debt obligations and the potential impact of future conversions.

Management Comments

• Jason Reese, Chairman & CEO of Imperial Capital Asset Management, LLC, signed on behalf of multiple reporting entities, indicating his central role.
• The filing notes that Jason Reese has waived voting rights on 873,108 shares and has the right to acquire 118,476 shares upon vesting within 60 days, highlighting his direct and potential future holdings.

Industry Context

StockSavvy.ai notes that forbearance agreements on convertible debt are often employed by companies facing liquidity constraints or seeking to avoid immediate share price pressure from potential dilution. This is a common strategy in industries with volatile capital structures or during periods of strategic repositioning.

Related Party Transactions

• The forbearance agreement is between Long Ball Partners, LLC (a reporting person) and Great Elm Group, Inc. (the Issuer), where Jason Reese is CEO and Chairman of the Issuer and associated with the reporting persons.

Stakeholder Impact

• Shareholders: Potential for delayed dilution from convertible notes, but also a signal of potential financial considerations for the company.
• Creditors: The forbearance may provide some stability by managing the conversion of debt, but the underlying debt obligations remain.
• Management: Jason Reese's significant beneficial ownership and leadership role are highlighted.

Next Steps

• Monitor the status of the forbearance agreement and any potential extensions or terminations.
• Observe future filings for any changes in beneficial ownership or conversion of PIK Notes.
• Evaluate the company's financial performance and strategic decisions leading up to the Forbearance End Date of November 10, 2027.

Key Dates

Recommendation

The filing primarily details a forbearance agreement on convertible debt, which postpones potential dilution but also signals ongoing financial considerations for Great Elm Group. While not indicating immediate financial distress, it lacks positive catalysts for a buy recommendation. The significant ownership by reporting persons suggests a stable, albeit cautious, investor base, making 'hold' appropriate pending further operational or financial developments.

Keywords

Convertible Notes, Forbearance Agreement, Beneficial Ownership, Schedule 13D, Share Dilution, Debt Conversion, Great Elm Group