Finish Line, Inc. (NDAQ:FINL) is quickly finding itself under increasing pressure from shareholders who are questioning the board's longterm strategies to unlock shareholder value. Standing at the head of this group is the Clinton Group, a 4.4% holder of the company who is actively pushing for changes. The hedge fund filed a schedule 13D/A with the SEC today containing yet another letter to management:

"We are disappointed that you have not responded to us formally since our letter dated September 7, 2006 ("September 7th Letter"). However, we are appreciative of the constructive  dialogue that we have had with your management  team regarding the business and the progress of turning around performance. Since our letter was filed, we have received  numerous inbound telephone calls from both investment bankers, other institutional investors and private equity firms who share our views on The Finish Line, Inc. ("Finish Line" or the "Company").

We would like to reiterate  that we are  supportive  of you and your  management team as operators of the Company who are capable of guiding  Finish Line through the temporarily difficult environment. We note the commencement of a turnaround as illustrated in your press release of last week. However, we are beginning to question you and your board's  intentions  for  building long-term  shareholder value. We believe that being "very, very open minded" in  consideration  of the "long-term  best  interest of all the  shareholders,"(1)  should  entail an open dialogue with one of your largest shareholders and greater consideration of the proposals that we have detailed." (Read More)

Then the hedge fund goes on to outline some suggestions they have for improving the company's situation:

"We continue to believe that Finish Line's stock price is negatively affected by the dual class voting structure  (Class  A/Class B) for the  Company's common shares. We note that merely "having always had such a structure" is no longer meaningful in today's more shareholder friendly environment.

When we met in your offices in Indianapolis, we discussed capital allocation for the business. Given the strong balance sheet position of the Company, we think that the board  should  consider returning cash to the shareholders by significantly increasing the dividend.

In our September 7th Letter, we described the reasonableness of a modest senior debt financing to commence a Dutch tender offer to optimize the capital structure. We would be willing to discuss with you terms and conditions of a new credit facility which includes a $75 million undrawn revolving credit facility and a $100 million term loan B syndicated through the efforts of Clinton Group, Inc. (Clinton Group).

We believe this course of action is accretive to continuing  shareholders while (i) still allowing for a prudent capital structure; (ii) not limiting the growth plans of the management team and (iii) not detrimentally affecting the level of float." (Read More)

If the Clinton Group is able to solicit a response from management and get these changes implemented, it could mean significant share price appreciation over the long run along with an increased dividend. With many other shareholders and investment bankers expressing their support for the hedge fund, this becomes a strong possibility. This makes FINL a stock worth watching over the next few months.

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