Form 4: Northern Right Capital Rebalances Great Elm Group Holdings, Extends Convertible Note Forbearance

Northern Right Capital Management, a 10% owner and director of Great Elm Group, Inc., rebalanced its holdings of common stock and convertible notes among its affiliated entities and extended a forbearance agreement on convertible note conversions until July 2026.

Summary

• Northern Right Capital Management, L.P. and its affiliates, including Northern Right Capital (QP), L.P. and Northern Right Long Only Master Fund LP, engaged in an internal rebalancing transaction involving Great Elm Group, Inc. securities.
• Northern Right Capital (QP), L.P. transferred 207,570 shares of Great Elm Group common stock to Northern Right Long Only Master Fund LP at a price of $2.0701 per share.
• Following this transaction, the reporting persons collectively beneficially own 4,243,168 shares of common stock indirectly.
• Northern Right Capital (QP), L.P. also transferred an aggregate principal amount of $327,829 of 5.0% Convertible Senior PIK Notes due 2030 to Northern Right Long Only Master Fund LP.
• These notes have a conversion price of $3.4722 per share and represent a conversionary interest in 94,415 shares of common stock.
• The reporting persons collectively beneficially own $7,487,304 in these convertible notes indirectly.
• An amendment to a forbearance agreement was executed on July 15, 2025, extending the period during which Northern Right Capital (QP), L.P., Northern Right Long Only Master Fund LP, and Matt A. Drapkin will not exercise their rights to convert the 5.0% Convertible Senior PIK Notes due 2030 into common stock until July 15, 2026.

Sentiment

Score: 6

Explanation: The rebalancing transaction is neutral, being an internal adjustment. The extension of the forbearance agreement is mildly positive as it defers potential dilution for Great Elm Group, Inc., providing more stability regarding its capital structure for an extended period.

Positives

• The extension of the forbearance agreement until July 15, 2026, provides Great Elm Group, Inc. with continued stability regarding potential dilution from the conversion of the 5.0% Convertible Senior PIK Notes due 2030.

Risks

• The existence of convertible notes represents a potential future dilution risk for existing shareholders if and when they are converted into common stock, although this risk is currently mitigated by the forbearance agreement.

Future Outlook

The forbearance agreement, which prevents the conversion of 5.0% Convertible Senior PIK Notes due 2030 into common stock, has been extended until July 15, 2026. This indicates that significant dilution from these notes is not expected before that date.

Industry Context

This Form 4 filing details an insider transaction and a specific agreement related to convertible debt. It does not provide information relevant to broader industry trends or competitive dynamics.

Related Party Transactions

• The transfer of 207,570 shares of common stock and $327,829 principal amount of 5.0% Convertible Senior PIK Notes due 2030 between Northern Right Capital (QP), L.P. and Northern Right Long Only Master Fund LP constitutes a related party transaction, as both are affiliated entities under Northern Right Capital Management, L.P.
• The forbearance agreement and its amendments involve Northern Right Capital (QP), L.P., Northern Right Long Only Master Fund LP, and Matt A. Drapkin, who are related parties to the issuer as 10% owners and directors.

Stakeholder Impact

• Shareholders: The extension of the forbearance agreement delays potential dilution from the conversion of convertible notes, which could be viewed positively as it provides more certainty regarding the outstanding share count for a longer period.
• Creditors: The forbearance agreement relates to convertible notes, which are a form of debt. The extension of the non-conversion period could impact the perceived equity cushion for creditors, though the primary impact is on equity holders.

Next Steps

• The forbearance agreement is set to expire on July 15, 2026, at which point the parties may need to decide on further extensions or allow conversion rights to become exercisable.

Key Dates

Recommendation

Keywords

Great Elm Group, GEG, Northern Right Capital Management, SEC Form 4, Insider Transaction, Beneficial Ownership, Common Stock, Convertible Notes, Forbearance Agreement, Equity Rebalancing, Investment Management