SCHEDULE: Northern Right Capital Group Increases Stake in Great Elm Group to 20.7%, Extends PIK Note Forbearance

Northern Right Capital and its affiliates have increased their beneficial ownership in Great Elm Group, Inc. to 20.7% of outstanding common stock, while extending the forbearance period for the conversion of their PIK Notes until July 15, 2026.

Summary

• Reporting Persons, including Northern Right Capital Management, Northern Right Capital (QP), Northern Right Long Only Master Fund, Northern Right Fund GP, BC Advisors, and Matthew A. Drapkin, collectively beneficially own 6,026,001 shares of Great Elm Group, Inc. Common Stock.
• This aggregate ownership represents approximately 20.7% of the outstanding Common Stock, based on 29,065,531 shares outstanding.
• The outstanding share count includes 27,940,476 shares reported as of May 2, 2025, plus 1,125,055 shares from the maximum conversion of PIK Notes held by Managed Accounts.
• Northern Right Capital (QP) and Northern Right Long Only Master Fund LP (NRC LO) have agreed to extend their forbearance from converting their respective PIK Notes until July 15, 2026.
• On July 14, 2025, Northern Right Capital (QP) transferred $327,829 of PIK Notes to NRC LO, along with 207,570 shares of Common Stock, at an approximate price of $2.0701 per share.
• Matthew A. Drapkin, a key Reporting Person, holds 657,778 shares directly and has a conversionary interest in 93,756 PIK Note shares, also subject to the forbearance agreement until July 15, 2026.
• Mr. Drapkin was awarded 153,846 restricted shares on January 3, 2025, with 70,971 remaining unvested within 60 days of the statement date and 5,952 vesting within 60 days.

Sentiment

Score: 6

Explanation: The filing indicates a significant and increasing stake by a key investor group, which can be seen as positive. However, the ongoing deferral of PIK note conversion highlights a future dilution risk, balancing the sentiment. The internal transfer of shares and notes between related entities is neutral.

Positives

• Increased beneficial ownership by a significant investor group (Northern Right Capital and affiliates) to 20.7% may signal confidence in the company's long-term prospects.
• The extension of the forbearance agreement until July 15, 2026, for PIK Note conversion by Northern Right QP and NRC LO defers potential dilution from these specific notes for another year.

Negatives

• The potential future conversion of PIK Notes held by various reporting persons and managed accounts could lead to significant dilution for existing shareholders, with up to 1,125,055 shares from Managed Accounts and 1,031,301 shares from Northern Right QP and NRC LO.

Risks

• Future dilution risk from the conversion of Payment-in-Kind (PIK) Notes held by various entities, including Managed Accounts, Northern Right QP, NRC LO, and Matthew A. Drapkin, which could add a substantial number of shares to the outstanding common stock.
• The forbearance agreement only defers, but does not eliminate, the risk of dilution from PIK Note conversion.

Future Outlook

The forbearance agreement for the conversion of PIK Notes held by Northern Right Capital (QP) and Northern Right Long Only Master Fund LP has been extended until July 15, 2026, indicating that potential dilution from these specific notes will be deferred for another year.

Industry Context

This Schedule 13D amendment primarily details changes in beneficial ownership and related agreements for a significant investor group. It reflects ongoing strategic positioning by a major shareholder in Great Elm Group, Inc., rather than broader industry trends or competitive dynamics.

Comparison to Industry Standards

• This filing is an ownership disclosure (Schedule 13D) and does not contain financial performance metrics or operational results that would allow for a direct comparison to industry standards, comparable companies, or projects.

Management Changes

Corporate Governance

Legal Proceedings

• No litigation or regulatory matters are mentioned in this filing.

Related Party Transactions

• On July 14, 2025, Northern Right Capital (QP), L.P. transferred $327,829 of PIK Notes and 207,570 shares of Common Stock to Northern Right Long Only Master Fund LP. Both entities are part of the Northern Right Capital group of Reporting Persons.
• The Forbearance Agreement was amended on July 15, 2025, between related parties (Northern Right QP and NRC LO) to extend the forbearance date for PIK Note conversion.

Stakeholder Impact

• Shareholders: The increased beneficial ownership by Northern Right Capital and its affiliates could be viewed positively as a sign of strong investor commitment. However, the potential future conversion of PIK Notes represents a significant dilution risk, which could negatively impact per-share value. The extension of the forbearance agreement defers this dilution for a period.
• Management/Board: Matthew A. Drapkin's continued service on the board and his significant ownership stake align his interests with the company's performance.

Next Steps

• Continued service of Matthew A. Drapkin as a member of the board of directors of the Issuer, contingent upon which his restricted shares will vest.
• Potential conversion of PIK Notes by Northern Right QP, NRC LO, Matthew A. Drapkin, and Managed Accounts after July 15, 2026, subject to the terms of the Forbearance Agreement and PIK Notes.

Key Dates

Recommendation

Keywords

Great Elm Group, GEG, Schedule 13D, SEC filing, beneficial ownership, PIK Notes, convertible notes, forbearance agreement, Northern Right Capital, Matthew A. Drapkin, shareholder activism, investment management, corporate governance