Great Elm Group, Inc. (NASDAQ:GEG), a provider of prepackaged software services, announced on Tuesday that its Chairman and Chief Executive Officer, Jason Reese, has entered into a voting waiver agreement. As per the agreement, Mr. Reese has waived all voting rights associated with his shares of the company's common stock, both those currently held and any that may be awarded in the future for his service to the company or its subsidiaries.
The agreement, effective as of Tuesday, stipulates that the waiver applies to all shares granted or awarded to Mr. Reese in his individual capacity, and will remain in effect until one of several specified termination events occurs. These events include Mr. Reese no longer serving as an officer or director of Great Elm Group, a solicitation of a stockholder vote for a significant share issuance, a sale of substantially all of the company's assets, Mr. Reese's ownership falling below 15% of the total outstanding shares, or the filing of a proposal for a major transaction involving the company by a third party.
The waiver is designed to terminate automatically should any of these events take place, unless both parties agree in writing to continue the waiver. This arrangement aims to address potential concerns regarding the concentration of voting power and to comply with regulatory and corporate governance standards.
The details of the agreement have been outlined in a filing with the Securities and Exchange Commission, which includes the full text of the Voting Waiver Agreement. The agreement is an important governance decision for Great Elm Group, ensuring that voting rights are distributed more broadly among all shareholders.
In other recent news, Great Elm Group has reported significant developments. The company saw a robust fiscal fourth quarter in 2024, with revenue tripling year-over-year to $9 million and assets under management (AUM) increasing by 22%. Despite a net loss of $0.6 million for the quarter, largely due to unrealized losses on investments, adjusted EBITDA rose to $1.2 million, up from $0.4 million in the same period the previous year.
Great Elm Group has also made a critical change in its financial oversight structure, parting ways with its previous independent registered public accounting firm, Grant Thornton LLP. The company has since appointed Deloitte & Touche LLP as its new independent auditor for the fiscal year ending June 30, 2025.
InvestingPro Insights
Great Elm Group's recent corporate governance move comes at a time when the company is facing financial challenges. According to InvestingPro data, GEG's revenue for the last twelve months as of Q4 2023 stood at $17.83 million, with a substantial revenue growth of 105.86% over the same period. However, this growth hasn't translated into profitability, as the company reported an operating income of -$7.84 million.
InvestingPro Tips highlight that GEG is "quickly burning through cash" and "suffers from weak gross profit margins." These tips align with the company's financial data, which shows a gross profit margin of only 5.48% for the last twelve months. The decision to implement voting rights changes may be part of a broader strategy to address these financial challenges and improve corporate governance.
Despite these challenges, another InvestingPro Tip notes that "liquid assets exceed short term obligations," suggesting that the company maintains some financial flexibility. This could provide GEG with a buffer as it navigates its current financial situation and implements governance changes.
For investors seeking a more comprehensive analysis, InvestingPro offers 5 additional tips for Great Elm Group, providing deeper insights into the company's financial health and market position.
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