SCHEDULE 13D/A: Star Equity Fund Launches Proxy Contest for Gyrodyne Board Seats, Nominates Two Directors

Star Equity Fund, holding a 7.1% stake in Gyrodyne, LLC, has initiated a proxy solicitation to elect two new director nominees, Hannah M. Bible and Matthew R. Sullivan, to the company's board at the 2025 annual meeting.

Summary

• Star Equity Fund, LP and its affiliates, along with two director nominees, have formed a group to beneficially own 156,073 shares of Gyrodyne, LLC Common Stock, representing approximately 7.1% of the outstanding shares.
• The group has formally nominated Hannah M. Bible and Matthew R. Sullivan for election to Gyrodyne's Board of Directors at the upcoming 2025 annual meeting of shareholders.
• The purpose of this filing is to disclose the group's intent to solicit proxies to elect their slate of director nominees.
• Star Equity Fund has entered into a Joint Filing and Solicitation Agreement with the other reporting persons, agreeing to jointly file Schedule 13D amendments and solicit proxies.
• The Nominees have agreed not to enter into any transactions in Gyrodyne securities without the prior written consent of Star Equity Fund.
• Star Equity Fund has committed to bearing all pre-approved expenses incurred in connection with the group's proxy solicitation activities.
• Indemnification Agreements have been signed, where Star Equity Fund agrees to indemnify the nominees against certain claims arising from the solicitation, excluding those due to gross negligence, willful misconduct, or material breach of agreement.
• The total number of Gyrodyne shares outstanding as of May 5, 2025, was 2,199,308.
• Star Equity Fund, LP made several small purchases of Gyrodyne shares between May 28, 2025, and June 4, 2025, at prices ranging from $8.16 to $8.26 per share.

Sentiment

Score: 7

Explanation: The sentiment is moderately positive. While a proxy contest can introduce uncertainty, the presence of an activist investor like Star Equity Fund, with a significant stake and a clear intent to improve governance by nominating qualified directors, is often viewed favorably by the market as it can lead to value creation and better alignment with shareholder interests. The detailed biographies of the nominees also suggest a serious effort to bring relevant expertise to the board.

Positives

• The filing indicates an activist investor's engagement, which can sometimes lead to improved corporate governance and strategies aimed at unlocking shareholder value.
• The nominated directors, Hannah M. Bible and Matthew R. Sullivan, possess diverse professional backgrounds in legal, finance, investment management, and construction, potentially bringing valuable expertise to the board.
• Star Equity Fund has committed to covering the expenses of the proxy solicitation, reducing the financial burden on the nominees and demonstrating commitment to their campaign.

Negatives

• A proxy contest can be disruptive and costly for the company, potentially diverting management's attention and resources from core business operations.
• The indemnification agreements, while standard for nominees, highlight the potential for legal disputes arising from the solicitation.

Risks

• Jeffrey E. Eberwein, a key reporting person and manager of Star Equity GP and Star Investment Management, was subject to an SEC administrative order on February 24, 2020, related to allegations of failure to properly disclose certain transactions and obtain client consent, and failure to implement written policies and procedures by an entity he managed (Lone Star Value Management, LLC). This could raise concerns about past compliance issues.
• The outcome of the proxy solicitation is uncertain, and there is no guarantee that the nominated directors will be elected, which could lead to continued shareholder dissatisfaction if the current board remains unchanged.

Future Outlook

The future outlook for Gyrodyne, LLC includes a potential proxy contest at its 2025 annual meeting of shareholders, where Star Equity Fund will seek to elect its two nominated directors to the board. The outcome of this solicitation will determine the future composition of the board and potentially influence the company's strategic direction.

Management Comments

• Jeffrey E. Eberwein, Manager of Star Equity Fund GP, LLC, stated that the nominated candidates, Hannah M. Bible and Matthew R. Sullivan, are 'highly qualified director candidates' and 'experienced, capable, and fully committed to act in the best interests of all the Issuer's shareholders.'

Industry Context

This filing represents a classic example of shareholder activism, where an investment fund (Star Equity Fund) takes a significant stake in a company (Gyrodyne, LLC) and seeks to influence its management and strategic direction by nominating its own slate of directors. This trend is common in industries where investors perceive undervalued assets or underperforming management, aiming to unlock value through governance changes. Such actions often signal a belief that the company's current strategy is not maximizing shareholder returns.

Management Changes

Corporate Governance

Legal Proceedings

• Jeffrey E. Eberwein, a key reporting person, and Lone Star Value Management, LLC (an entity he managed), were subject to an SEC administrative order dated February 24, 2020. The order related to allegations that LSVM failed to properly disclose certain transactions and obtain client consent, and failed to implement written policies and procedures, violating Sections 206(3) and 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-7 thereunder. They consented to cease and desist, LSVM was censured, and civil penalties of $25,000 for Mr. Eberwein and $100,000 for LSVM were imposed.

Related Party Transactions

• The Joint Filing and Solicitation Agreement between Star Equity Holdings, Inc., Star Equity Fund, LP, Star Equity Fund GP, LLC, Star Investment Management, LLC, Star Value, LLC, Jeffrey E. Eberwein, Hannah M. Bible, and Matthew Sullivan, formalizing their group activities and financial arrangements related to the proxy solicitation.
• Indemnification Letter Agreements between Star Equity Fund, LP and each of the nominees, Hannah Bible and Matthew Sullivan, where Star Equity Fund agrees to indemnify them for certain claims arising from the solicitation.

Stakeholder Impact

• **Shareholders**: Directly impacted by the proxy contest, which aims to change board composition and potentially influence strategic direction, potentially leading to increased shareholder value or, conversely, disruption.
• **Current Management/Board**: Faces a challenge to their control and strategic vision, requiring resources and attention to defend against the proxy solicitation.
• **Nominated Directors**: Hannah M. Bible and Matthew R. Sullivan are directly impacted as they are proposed to join the board, with their professional reputations and future responsibilities at stake.

Next Steps

• Star Equity Fund will proceed with its proxy solicitation efforts to garner shareholder support for its nominated directors.
• Gyrodyne, LLC will hold its 2025 annual meeting of shareholders, where the election of directors will take place.

Key Dates

Keywords

Proxy Solicitation, Activist Investor, Board Nomination, Shareholder Activism, Corporate Governance, Schedule 13D, Gyrodyne LLC, Star Equity Fund, Director Election, SEC Filing