Finish Line Inc. (NDAQ:FINL) is a mall-based specialty retailer of athletic, lifestyle and outdoor footwear. Recently their stock has caused some concern among investors after sliding from $18 to below $12 during the past four months. This drop came as a result of lower than expected earnings and sales numbers during the last few quarters. The drop has prompted one of their largest shareholders and activist hedge fund, the Clinton Group, to petition the Board to seek strategic alternatives in a recent 13D filing with the SEC. In a letter attached to the filing, the group said:

"We have invested in Finish Line because we believe the market price of Finish Line shares fails to reflect the true earnings power of the traditional Finish Line concept stores, management's ability to turnaround the recent same store sales trends, the potential for margin improvement and realization of operating leverage and the value potential of the Man Alive and Paiva concepts. Further, we departed our meeting with a greater sense that such beliefs are indeed accurate.

While we are supportive of management as operators of the business, we are writing this letter to encourage your board to take immediate steps to enhance shareholder value. Today, we choose to highlight the following as initial steps that the board should do to enhance shareholder value: (1) eliminate the unfriendly shareholder corporate governance structure including the dual class voting structure, (2) commence a Dutch tender offer in conjunction with a modest senior debt financing, and (3) to the extent the share price continues to languish, engage a reputable investment banking firm to explore strategic alternatives including, but not limited to, a going private transaction or an outright sale of the Company."

Currently, Finish Line is trading at a low 11x earnings (industry 16x) with no debt and a sizable $72 million (or $1.30 per share) in cash which would make them an attractive target to any potential acquirer. The Board's response remains to be seen; however, with the stock up over 8% in early trading today, it is definitely a situation that warrants keeping an eye on.

Related Companies
Bakers Footwear Group, Inc. (BKRS)
Payless ShoeSource Inc. (PSS)
DSW, Inc. (DSW)