SCHEDULE: Hale Partnership Boosts HG Holdings Stake to 74.5%

Hale Partnership Capital Management and affiliates increased their beneficial ownership in HG Holdings, Inc. to 74.5% following a series of strategic transactions, including a share repurchase.

Summary

• Hale Partnership Capital Management, LLC and its affiliates (the "Reporting Persons") now beneficially own 3,804,935 shares of HG Holdings, Inc. Common Stock, representing approximately 74.5% of the outstanding shares.
• The beneficial ownership calculation is based on 5,107,035 outstanding shares, accounting for a recent repurchase.
• On April 21, 2025, several Hale Funds and a Managed Account contributed ACMAT Corporation shares to HG Holdings in exchange for 2,899,876 shares of HG Holdings Common Stock.
• This contribution was contingent on a Master Services Agreement, effective June 1, 2025, where HG Holdings will provide managerial and operational services to HP Risk Solutions, LLC (an affiliate of Mr. Hale) for $6 million annually over three years.
• On December 10, 2025, HG Holdings repurchased all 97,678 shares held by Hale Fund IV for $4.25 per share, totaling $415,131.50, in a privately negotiated transaction.
• Steven A. Hale II, Chairman and CEO of HG Holdings, holds 27,777 vested shares from a restricted stock award granted on June 28, 2019.

Sentiment

Score: 7

Explanation: The filing indicates a strong, controlling interest by Hale Partnership in HG Holdings, Inc., suggesting confidence and strategic alignment. The services agreement could be a positive for operational integration. However, the stock repurchase from one of the funds, while a specific transaction, slightly reduces the overall group's direct holdings, though the overall beneficial ownership remains very high.

Positives

• The significant increase in beneficial ownership by Hale Partnership and affiliates to 74.5% demonstrates strong conviction in HG Holdings, Inc.
• The Contribution Agreement and Master Services Agreement align the interests of the Reporting Persons with the Company's strategic direction, potentially enhancing operational efficiency and financial performance through the $6 million annual services contract.
• The vesting of 27,777 shares for Steven A. Hale II, Chairman and CEO, indicates long-term commitment and alignment with shareholder interests.

Negatives

• The repurchase of 97,678 shares from Hale Fund IV by HG Holdings, Inc. for $4.25 per share, while a privately negotiated transaction, reduces the direct stake of one of the Hale Funds.

Future Outlook

The Reporting Persons acquired the securities for investment purposes and may, in the future, acquire additional shares, dispose of shares, or continue to hold their current position, depending on various factors including the Company's financial position, strategic direction, market conditions, and regulatory environment.

Industry Context

This filing indicates a significant concentration of ownership in HG Holdings, Inc. by an investment group, which is common in smaller-cap companies or those undergoing strategic shifts. The services agreement suggests a move towards integrating operational management with the investment strategy, potentially aiming for enhanced value creation through direct involvement.

Comparison to Industry Standards

• The 74.5% beneficial ownership by a single group is a very high concentration, indicating strong control and influence over HG Holdings, Inc. This is significantly higher than typical institutional ownership in most publicly traded companies, which often ranges from 30-70% spread across multiple institutions.
• The Master Services Agreement, where HG Holdings provides services to an affiliate of its major shareholder, is a related-party transaction. While not uncommon, such agreements are typically scrutinized for fairness and market terms to ensure they benefit all shareholders, not just the controlling party. For example, similar arrangements exist in private equity-backed public companies where the PE firm provides management services, but the $6 million annual fee should be benchmarked against similar service contracts in the financial services or insurance industry for companies of comparable size and complexity.
• The stock repurchase from Hale Fund IV at $4.25 per share is a specific transaction. Without market price context, it's hard to assess its fairness, but privately negotiated repurchases are standard practice for managing stakes.

Related Party Transactions

• Assignment and Contribution Agreement: Hale Funds and Managed Account (managed by Hale Advisor) assigned ACMAT Shares to HG Holdings, Inc. in exchange for HG Holdings Common Stock.
• Master Services Agreement: HG Holdings, Inc. will provide managerial and operational services to HP Risk Solutions, LLC, a wholly-owned subsidiary of HP Holding Company, LLC, which is wholly owned by certain affiliates of Mr. Hale. This agreement involves HG Holdings receiving $6 million per year over three years.
• Stock Repurchase Agreement: HG Holdings, Inc. repurchased 97,678 shares of Common Stock from Hale Fund IV, one of the Reporting Persons, for $4.25 per share.

Stakeholder Impact

• Shareholders: Increased concentration of ownership by Hale Partnership could lead to more decisive strategic direction but also raises questions about minority shareholder influence. The services agreement could benefit the company's operations, potentially increasing shareholder value. The stock repurchase from Hale Fund IV impacts that specific fund's direct holdings.
• Employees: The services agreement outlines managerial and operational services, which could impact internal roles and responsibilities within HG Holdings, Inc.
• Creditors: The financial implications of the services agreement and any future transactions by the controlling shareholder group could indirectly affect the company's financial health and thus its creditors.

Next Steps

• Reporting Persons may acquire or dispose of additional shares of Common Stock or other securities of the Company in the future.
• HG Holdings, Inc. will provide managerial and operational services to HP Risk Solutions, LLC for three years under the Master Services Agreement.

Key Dates

Recommendation

The filing details a significant increase in beneficial ownership by Hale Partnership and its affiliates, reaching 74.5% of HG Holdings, Inc. This level of control suggests a strong commitment and potential for strategic direction from the major shareholder. The associated Master Services Agreement, where HG Holdings provides services to an affiliate of the controlling shareholder for $6 million annually, indicates a deeper operational integration and potential for value creation. However, the privately negotiated stock repurchase from one of the Hale Funds, while a specific transaction, doesn't provide a clear signal for broader market action. Given the high concentration of ownership, the stock may experience reduced liquidity and the company's decisions will be heavily influenced by the controlling group. For a seasoned investor, this scenario warrants a 'hold' to monitor the execution of the strategic initiatives and the impact of the related-party transactions on overall company performance and minority shareholder value before making further investment decisions.

Keywords

HG Holdings, Hale Partnership, Schedule 13D, Beneficial Ownership, Common Stock, SEC Filing, Investment Management, Corporate Governance, Stock Repurchase, ACMAT Corporation, Master Services Agreement, Steven A. Hale II