Great Elm Group, Inc. (“GEG”) Invests $6 Million to Support a $24 million Equity Raise for Great Elm Capital Corp. (“GECC”) at Net Asset Value
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Insights
The $6 million investment by Great Elm Group, Inc. in a special purpose vehicle to acquire $24 million of common stock in GECC at net asset value is a strategic move that could signal confidence in GECC's financial stability and growth prospects. By raising equity at NAV, GEG avoids diluting existing shareholders' interests, which is often well-received in the market. The transaction is designed to leverage GEG's infrastructure and scale its credit platform, potentially increasing its capacity to generate revenue.
From a financial perspective, the investment could enhance GEG's recurring revenue streams, a key metric for investors as it indicates a more predictable and stable financial outlook. However, the actual return on this investment will depend on GECC's performance and the effectiveness of its strategy to generate durable returns for shareholders. The support from GEG could provide GECC with additional resources to expand its portfolio, but this also introduces a level of risk associated with the performance of the newly acquired assets.
The announcement of this transaction may have implications for investor sentiment towards both GEG and GECC. Investors typically favor transactions that are accretive to earnings and support strategic growth initiatives. The market's reaction will hinge on the perceived value of GECC's common stock and the success of its strategy to generate durable returns. If GECC's strategy is successful, it could lead to a re-rating of both GEG and GECC's stock.
It is important to note that the alternative asset management sector is highly competitive and scaling operations can be critical for maintaining a competitive edge. By scaling its credit platform, GEG is positioning itself to better compete with larger players in the industry. The move could also be seen as a positive signal to the market regarding GEG's management confidence in its business model and growth trajectory.
Investments in special purpose vehicles are often made to achieve specific financial objectives, such as portfolio diversification or risk management. In this case, GEG's investment is also strategic, aiming to scale its credit platform. This can be seen as a proactive approach to capitalizing on market opportunities and potentially increasing market share.
However, the broader economic context should be considered. Factors such as interest rate trends, credit market conditions and economic growth forecasts can significantly influence the performance of credit platforms and the return on such investments. A favorable economic environment could enhance the potential for strong returns, while an economic downturn could pose challenges for achieving the expected outcomes.
PALM BEACH GARDENS, Fla., Feb. 08, 2024 (GLOBE NEWSWIRE) -- Great Elm Group, Inc. (the “Company” or “GEG”), (NASDAQ: GEG), an alternative asset manager, today announced it has invested
“This transaction leverages GEG’s key attributes to create a beneficial outcome for all stakeholders,” said Jason Reese, GEG’s Chief Executive Officer. “Raising equity at NAV for our permanent capital vehicle, GECC, will help leverage our infrastructure and help scale our credit platform. In addition, we believe our investment in the special purpose vehicle will deliver a strong return and allow us to grow our recurring revenue streams. GEG is committed to scaling its existing businesses and executing its strategic growth initiatives.”
Matt Kaplan, GECC’s Chief Executive Officer, said, “GECC is committed to generating durable returns for its shareholders, and we believe the transaction announced today is a validation of this strategy. We are pleased to have continued support from GEG which will further enable GECC to scale its portfolio and deliver for investors.”
About Great Elm Group, Inc.
Great Elm Group, Inc. (NASDAQ: GEG) is a publicly-traded, alternative asset manager focused on growing a scalable and diversified portfolio of long-duration and permanent capital vehicles across credit, real estate, specialty finance, and other alternative strategies. Great Elm Group, Inc. and its subsidiaries currently manage Great Elm Capital Corp., a publicly-traded business development company, and Monomoy Properties REIT, LLC, an industrial-focused real estate investment trust, in addition to other investments. Great Elm Group, Inc.’s website can be found at www.greatelmgroup.com.
Cautionary Statement Regarding Forward-Looking Statements
Statements in this press release that are “forward-looking” statements, including statements regarding expected growth, profitability, acquisition opportunities and outlook involve risks and uncertainties that may individually or collectively impact the matters described herein. Investors are cautioned not to place undue reliance on any such forward-looking statements, which speak only as of the date they are made and represent GEG’s assumptions and expectations in light of currently available information. These statements involve risks, variables and uncertainties, and GEG’s actual performance results may differ from those projected, and any such differences may be material. For information on certain factors that could cause actual events or results to differ materially from GEG’s expectations, please see GEG’s filings with the Securities and Exchange Commission (“SEC”), including its most recent annual report on Form 10-K and subsequent reports on Forms 10-Q and 8-K. Additional information relating to GEG’s financial position and results of operations is also contained in GEG’s annual and quarterly reports filed with the SEC and available for download at its website www.greatelmgroup.com or at the SEC website www.sec.gov.
This press release does not constitute an offer of any securities for sale.
Media & Investor Contact:
Investor Relations
investorrelations@greatelmcap.com
Source: Great Elm Group, Inc.
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