Harte Hanks Agrees to a $5.00 Sale to Star Equity — and at Least Half the Price Is a 10% Perpetual Preferred
Star Equity Holdings and Harte Hanks announced a definitive merger agreement at 8:30 a.m. ET on Friday, August 14 — before the opening bell, not after it. Star, a diversified holding company based in Old Greenwich, Connecticut, will acquire Chelmsford, Massachusetts-based Harte Hanks for $5.00 per share. Both companies put the aggregate equity value at approximately $38.4 million, based on roughly 7.68 million fully diluted shares. That is a share count, not a trading volume: $38.4 million divided by 7.68 million equals exactly $5.00, which is the arithmetic that confirms the noun.
The number that matters to a Harte Hanks holder, though, is not $5.00. It is the number of cents of that $5.00 that arrive as cash. Under the announced structure, up to 50% of the aggregate consideration — approximately $19.2 million — is payable in cash. The remainder is payable in Star's 10% Series A Cumulative Perpetual Preferred Stock, which already trades on Nasdaq under the ticker STRRP. No Star common stock will be issued in the deal at all. Stockholders may elect cash or preferred, and both releases say those elections are subject to proration. The asymmetry is stated outright in Star's release, which says holders may elect cash or Star preferred, "subject to proration, with aggregate cash payments capped at the above amount and Star Preferred Stock elections uncapped." Because cash is capped at 50%, the preferred is not up to half the price but at least half of it, and potentially all of it.
Read the asymmetry carefully, because it runs in one direction only. A holder who elects preferred is guaranteed preferred; there is no cap to prorate against. A holder who elects cash is guaranteed nothing in particular. The cash pool is fixed at roughly $19.2 million, which at $5.00 per share covers about 3.84 million shares — half the 7.68 million fully diluted share count. If holders of more than 3.84 million shares elect cash, every cash-electing share gets scaled back, and the shortfall is made up in preferred stock. What follows is this publication's own illustration, not the deal's mechanic. Neither release discloses the allocation formula, and the example below simply assumes cash electors are scaled back pro rata and ignores non-electing shares, whose treatment has not been disclosed at all; the real waterfall may differ in ways that change every number in it. On those assumptions, and using round numbers rather than any figure the companies have published: suppose holders of 6.0 million shares elect cash. The cash pool covers 3.84 million shares, so the proration factor is roughly 64%. Each cash-electing share would then receive about $3.20 in cash and about $1.80 of stated consideration in preferred — roughly 0.18 of a STRRP share at the $10.00 liquidation preference. The holder asked for $5.00 in cash and received a security instead for 36% of the position. That is what proration does, and it is why the election form is not a choice in the ordinary sense.
The Harte Hanks release states the two election options in specific terms: $5.00 in cash for each share, subject to the 50% cap of approximately $19.2 million, or 0.50 shares of Star's publicly traded 10% Series A Cumulative Perpetual Preferred Stock for each Harte Hanks share, based on its $10.00 per-share liquidation preference. Half a share at $10.00 of liquidation preference is $5.00 of stated value — but stated value and market value are different things, and the exchange is struck on the former.
The precise proration formula is not yet public. A Current Report on Form 8-K carrying the merger agreement as an exhibit is due within four business days of the event, which would be by Thursday, August 20, and as of this writing neither company's merger 8-K nor the agreement itself was retrievable through EDGAR or the filing mirrors The MicroCap Herald checked — on a re-check Saturday, the most recent Harte Hanks 8-K on file was dated May 21, 2026, and no Form S-4 was listed. Nothing in this article is drawn from the merger agreement, which this publication has not read; every term described here comes from the two press releases. The operative mechanics — the exact allocation waterfall, the election deadline, the treatment of non-electing shares — will live in that exhibit and, more fully, in the Form S-4 registration statement containing the proxy statement/prospectus that Star has said it will file. Both companies' releases urge Harte Hanks stockholders to read the S-4 before voting. Until it exists, the summary above is a summary of a summary.
So what is the security? Star's 10% Series A Cumulative Perpetual Preferred is not newly minted for this deal. It is already outstanding and already listed. The terms, taken from Star's prospectus supplement on Form 424B5 filed in May 2026, are a $10.00 per-share liquidation preference, a 10.0% annual rate equal to $1.00 per share per year, dividends that are cumulative and payable quarterly in arrears on or before the last day of each of March, June, September and December, and no stated maturity, no sinking fund and no mandatory redemption. It ranks senior to Star's common stock and junior to all of Star's existing and future indebtedness and other liabilities. It generally carries no voting rights, though if dividends fall into arrears for six or more consecutive quarters holders gain the right to vote as a class to elect two additional directors.
The word perpetual is the important one and it is easy to skim past. This instrument never matures. There is no date on which a holder is contractually owed $10.00 per share in cash. Absent a redemption Star is not obliged to make, or a sale in the open market, the only cash a holder receives is the dividend. A Harte Hanks stockholder who ends up with preferred has not deferred a cash payment; the stockholder has exchanged a share of a company being bought for cash for a claim on a dividend stream with no scheduled return of principal.
The preferred exists because of a 2025 transaction. Star Equity and Hudson Global completed a merger on August 21-22, 2025, in which each share of the old Star common stock converted into 0.23 shares of Hudson common and each share of old Star preferred converted into one share of a newly created Hudson 10% Series A Cumulative Perpetual Preferred. Roughly 2.69 million preferred shares were issued in that exchange, per contemporaneous coverage of the closing. Hudson was subsequently renamed Star Equity Holdings, and the surviving tickers are STRR for the common and STRRP for the preferred. Harte Hanks holders electing stock would be receiving more of a security created one year ago in a different merger.
It trades, but thinly, and below par — and the quote itself needs a caveat before it can be used. STRRP was last quoted at $9.78, down $0.36 or 3.53%, in a range of $9.48 to $9.96, by both SoFi and IndMoney, which agree on all four figures. Neither labels that price a closing price. SoFi carries no timestamp at all; IndMoney stamps its quote after Friday's bell, which is the basis on which The MicroCap Herald treats $9.78 as Friday's last print rather than a confirmed official close. Data vendors handle this ticker unevenly — StockAnalysis's STRRP page had not updated past August 4, when it showed $10.06, and lists the class's shares outstanding as 3.70 million, which is Star's common share count, not its preferred count; CNBC files the symbol under a different company name; IndMoney's own page returns a 52-week range of $0.00. Readers should treat the $9.78 as a well-corroborated indication and not as a figure from the tape. On volume, SoFi puts the average daily figure at 1,129 shares. IndMoney's 633,700 is not credible against a class of roughly 2.5 million shares — it would turn the entire class over in four days — and is not used here. StockAnalysis's single-session volume of 5,883 shares on August 4 is the only independent datapoint The MicroCap Herald could obtain, and it puts activity in the thousands of shares rather than the hundreds of thousands, which is consistent with SoFi's order of magnitude without confirming its average. StockAnalysis does corroborate SoFi's 52-week range of $8.75 to $10.92. The thin-trading characterisation is therefore reported as an indication, not a measurement. The price is the firmer point: at $9.78, half a share is worth about $4.89, not $5.00. The stock election was already a shade under the headline number on the day it was announced, and there is nothing anchoring it there.
The distinction between the coupon and the yield deserves stating plainly. Ten percent is the rate on the $10.00 liquidation preference: $1.00 per share per year, regardless of where the shares trade. At $9.78, $1.00 of annual dividend is a current yield of roughly 10.2% — modestly above the stated coupon precisely because the shares are below par. If STRRP were to trade at $8.75, the low end of SoFi's 52-week range, the same $1.00 would be an 11.4% current yield and the same half-share would be worth $4.38. The coupon does not move. The value of what a holder received does.
That brings the question to Star's ability to pay, which is where the size of the two companies stops being a footnote. Star reported second-quarter 2026 results on the same Friday morning. Revenue was $54.9 million, up 54.6% year over year; gross profit was $22.8 million; the net loss was $1.8 million, and the net loss attributable to common shareholders was $2.5 million, or $0.66 per diluted share. Adjusted EBITDA, a non-GAAP measure, was $2.2 million against $1.3 million a year earlier. The roughly $0.7 million gap between the net loss and the loss attributable to common is instructive on its own: Star declared a preferred dividend of $0.25 per share in the quarter, and on approximately 2.5 million preferred shares that is about $0.6 million a quarter sitting between Star's results and its common holders before anything else happens.
The balance sheet at June 30, 2026 showed cash and equivalents of $6.8 million, plus $1.5 million of current and $0.6 million of non-current restricted cash. Total debt was $14.1 million — $9.0 million short-term and $5.1 million long-term. Total assets were $108.2 million and total stockholders' equity $59.8 million, with 3.7 million common shares and approximately 2.5 million Series A preferred shares outstanding. Set the $6.8 million of unrestricted cash against a cash component of approximately $19.2 million and the gap is roughly $12.4 million. Both releases say the cash portion is expected to be funded with a combination of cash on hand and debt financing, and note that Harte Hanks has a $25 million credit facility in place. Star's own common equity is worth less on the market than the company it is buying. STRR closed Friday at $9.80, down 3.50% from a previous close of $10.16, for a market capitalization of approximately $36.22 million on 3.70 million shares outstanding, per StockAnalysis. The announced equity value of Harte Hanks is $38.4 million. Revenue at Star was $209.75 million in the twelve months ended June 30, 2026, per StockAnalysis — a figure worth stating with its period attached, because the same site's overview page still carried a stale trailing-twelve-month number of $190.35 million that predates the June quarter. The companies project pro forma FY2025 revenue of approximately $384 million and pro forma adjusted EBITDA of approximately $30 million after approximately $10 million of estimated annualized run-rate cost synergies — projections, not results, and the synergies are an estimate the companies themselves label as such.
Then there is what the deal does to the capital structure above the common. If the consideration lands exactly at the announced 50/50 split, roughly $19.2 million of preferred at a $10.00 liquidation preference means about 1.92 million new STRRP shares, taking the class from roughly 2.5 million to about 4.4 million — a 77% increase — and the annual dividend obligation from roughly $2.5 million to roughly $4.4 million. Because preferred elections are uncapped, the ceiling case is larger: if every Harte Hanks holder elected preferred, the full $38.4 million would convert to about 3.84 million new shares, more than doubling the class to roughly 6.3 million and lifting the annual preferred dividend obligation to about $6.3 million. Those are this publication's calculations from the disclosed liquidation preference and share counts, not company figures. Star also registered an at-the-market program of up to $8.7 million of the same preferred in the May 2026 prospectus supplement, with Ladenburg Thalmann & Co. as sales agent, which can add to the class independently of the merger. How much of that program has been used, if any, is not stated in Star's second-quarter release, which does not mention the program.
On the premium, the honest answer is that it depends entirely on which day you measure from, and the reference date has not been disclosed. The Harte Hanks release headline claims an approximately 100% premium to the unaffected share price without naming that price or its date. Harte Hanks closed at $2.51 on Wednesday, August 12 on 39,046 shares, then rose 11.95% to $2.81 on Thursday, August 13 on 86,625 shares — a move that preceded Friday morning's announcement. Against the August 12 close, $5.00 is a 99.2% premium, which is the figure the headline appears to describe. Against Thursday's $2.81 close, the last print before the news, it is 77.9%. Anyone quoting roughly 100% is implicitly excluding Thursday's session.
Friday's own tape is the cleanest read on how the market weighed the structure. Harte Hanks closed at $4.30, up 53.02%, on volume of 4,655,210 shares — again, shares traded, against a fully diluted share count of about 7.68 million. A $4.30 close is 14.0% below the $5.00 headline price. Deals that close quickly and pay cash do not normally leave that much on the table. A discount of that size is the market pricing some combination of the proration risk, the value of the preferred, the financing condition and the possibility the deal does not close at all.
The conditions are not trivial. Closing requires the affirmative vote of Harte Hanks stockholders at a special meeting later in 2026 and the effectiveness of the Form S-4, plus customary conditions; Star stockholder approval is not expected to be required. The Harte Hanks release additionally lists availability of the required financing among the closing conditions — a financing condition, which the Star release does not mention. The two releases also disagree on timing: Star says closing is anticipated before year-end 2026, while the Harte Hanks release says the transaction is expected to close within approximately 60 to 90 days. Both were issued the same morning. The merger agreement includes a 30-day go-shop period expiring at 11:59 p.m. Eastern Time on Sunday, September 13, 2026, during which Harte Hanks and its advisers may actively solicit alternative proposals and after which it may continue discussions with any party that submitted a qualifying proposal during the window. Star has customary matching rights and termination fees apply; no termination fee amount has been publicly disclosed.
Harte Hanks arrives at this agreement with a clean balance sheet and a deteriorating income statement. At March 31, 2026 the company reported cash of $4.5 million, no outstanding debt and $24.3 million of undrawn capacity on its credit facility, against total liabilities of $70.3 million and stockholders' equity of $20.1 million. First-quarter revenue was $37.3 million, down 10.3% year over year, with an operating loss of $768,000, a net loss of $0.6 million or $0.08 per share, and adjusted EBITDA of $0.7 million against $1.8 million a year earlier. On Friday the company also reported second-quarter results, but The MicroCap Herald could not retrieve a Harte Hanks release or Form 10-Q for the quarter, and the figures below do not come from the company. They come from an earnings snapshot carried by the Associated Press via WTOP which discloses that it "was generated by Automated Insights using data from Zacks Investment Research" — an algorithmic wire summary, not reporting and not a company disclosure. It puts revenue at $38 million and the quarterly net loss at $5 million, or 67 cents per share. Those are rounded to the nearest million and should be treated as provisional until the company's own release and Form 10-Q are available.
Two items on the liability side belong in any assessment of this deal. Star will assume Harte Hanks' defined benefit pension plan assets and liabilities at closing. Harte Hanks carried a $3.7 million qualified pension liability and a $16.8 million nonqualified pension liability at March 31, 2026 — roughly $20.5 million combined, against Star's $59.8 million of total stockholders' equity at June 30. Separately, Star disclosed approximately $215 million of usable U.S. federal net operating losses as of December 31, 2025, and it explains the all-preferred, no-common consideration in exactly those terms: because the merger consideration consists of preferred rather than common stock, Star does not expect the transaction to cause an ownership change under Section 382 of the Internal Revenue Code or to limit NOL availability. Star maintains a rights agreement and a charter amendment capping beneficial ownership of its common stock at 4.99% for the same reason.
One historical note for anyone reading Harte Hanks charts back more than a few years: the company effected a 10-for-1 reverse split effective January 31, 2018, announced in December 2017 after the NYSE — where it was then listed — notified it that its average closing price had fallen below $1.00 over 30 consecutive trading days. Per-share figures before that date are not comparable to today's without adjustment. Neither company disclosed a going-concern qualification or an active listing-standard deficiency in the filings and releases reviewed for this article; the 2018 split is history, not a live clock.
The executives framed the transaction in their own terms. Jeff Eberwein, CEO of Star, said in a longer statement: "Our team has run this playbook before – bring a good operating business inside our holding company structure, remove duplicative public company and corporate costs, and let the operators focus on serving clients and growing the business." David Fisher, President of Harte Hanks, said: "This transaction delivers a compelling premium and directly addresses the structural challenges Harte Hanks faces as a small standalone public company. It provides shareholders with immediate liquidity and continued economic participation through a publicly traded, income-generating security." Jack Griffin, Chairman of the Harte Hanks Board of Directors, said: "The Board carefully considered the options available to Harte Hanks and believes this transaction represents the best outcome for our shareholders. It delivers compelling value today and reflects the Board's focus on maximizing value for shareholders." Citizens Capital Markets & Advisory is lead financial adviser to Harte Hanks, with Oaklins DeSilva & Phillips also advising and Baker Botts as legal counsel; Baker Hostetler is legal adviser to Star.
Fisher's phrase "continued economic participation through a publicly traded, income-generating security" is an accurate description of a perpetual preferred, and it is also the whole risk in one clause. The security is publicly traded and it generates income. It is not cash, it has no maturity, it ranks behind every dollar of Star's debt, it carries essentially no votes, and its market price on the announcement day was below its liquidation preference. Whether a holder ends up with it is determined not only by that holder's election but by what every other holder elects. Harte Hanks stockholders will not have the operative document in front of them until Star files the Form S-4, and no vote is being solicited before then.
This article is news and analysis, not investment advice. It expresses no view on whether to elect cash or stock, on the merits of either security, or on whether this transaction will close. Micro-cap and nano-cap securities carry heightened risks including illiquidity, dilution, financing risk and deal-break risk, and merger consideration paid in a thinly traded perpetual preferred security carries all of them at once. Readers should consult the companies' SEC filings — in particular the Form 8-K carrying the merger agreement and the Form S-4 proxy statement/prospectus when filed — and their own advisers.
