Aether Holdings Inc. (NDAQ:AETH) has decided to switch businesses yet again. For those who don't remember, Aether started out in the wireless business back before the dotcom boom. After reducing its workforce by over 99% and watching its stock price move from mover $300 to under $3, the company decided to get into the mortgage securities business. Now, in a recent 8-k filing with the SEC, they announced they were changing businesses yet again - this time to the footwear business (through their NexCen Brands subsidiary). According to the filing:

"On August 21, 2006, Aether Holdings, Inc., a Delaware corporation (the “Company”), NexCen Franchise Brands, Inc., a Delaware corporation and wholly owned subsidiary of the Company (“NexCen Brands”), and NexCen Franchise Management, Inc., a Delaware corporation and wholly owned subsidiary of NexCen Brands (“NexCen Management,” and together with NexCen Brands, the “Purchasers”), entered into an Equity Interest and Purchase Agreement (the “Purchase Agreement”) with Athlete’s Foot Marketing Associates, LLC (“Seller”), Athlete’s Foot Brands, LLC (“Brands”), The Athlete’s Foot Marketing Support Fund, LLC (“Support Fund,” and together with Brands, the “AFB Companies”), Robert J. Corliss (“Corliss”), Donald Camacho (“Camacho”), Timothy Brannon (“Brannon”) and Martin Amschler (“Amschler,” and together with Corliss, Camacho and Brannon, the “Shareholders”)."

They also announced their exit from the mortgage securities business with the sale of their remaining assets:

"Exit from Mortgage-Backed Securities Business:

At the same time as it approved the Acquisition, the Company’s Board of Directors (the “Board”), taking into account a range of business, strategic and financial considerations, decided that it was in the best interests of the Company and its stockholders for the Company to sell its remaining MBS investments for the purposes of exiting the MBS business and allocating those assets to support the growth and development of Aether’s IP business. The decision to exit the MBS business and focus on the IP business is not conditioned upon the completion of the Acquisition and, in light of the Company’s intention to finance a portion of the Acquisition purchase price with third-party debt, the Company expects to complete the Acquisition without needing to liquidate any of its MBS investments.

Because the reallocation of the Company’s MBS resources to the IP business may be considered a 'sale of all or substantially all' of the Company’s assets under Section 271 of the Delaware General Corporation Law, the Company will seek stockholder approval at its 2006 annual meeting to effect this reallocation of its assets. The Company expects to file a proxy statement for the annual meeting with the Securities and Exchange Commission within the next two weeks and anticipates that the annual meeting will be held early in the fourth quarter."

The company's new business plan is to convert all the stores it acquires into franchises and then maximize their value by building their brand. So why should we be concerned with such an unfocused company with a long history of losses that is currently struggling with it's second turnaround attempt? Well, because of the long history of losses (and its bank account)! In the tax world, there is something known as a "net operating loss carryforward" (NOLs), which enables companies to deduct their past losses against future earnings. This will give Aether a big break as it works to turnaround the company in a new market. Moreover, the company also has about $2/share in cash! This will help the company with funding acquisitions and paying off long-term debt. All things considered, the company has a dirty past and a long road ahead of it, but management has a lot of leftover "benefits" available to them to effectively capitalize on their new strategy. Whether or not they are able to do so remains to be seen; however, the stock definitely warrants keeping an eye on!

Intermagnetics General Corporation (NDAQ:IMGC) announced yesterday in a 14A filing with the SEC that they plan on moving forward with their merger plans with Royal Philips through their subsidiary Philips Holding (NYSE:PHG). This merger, which was originally announced on June 15th, had been the subject of two outstanding shareholder lawsuits that sought to prevent the merger. The lawsuits alleged that the company had "breached their fiduciary duties by failing to publicly announce an open bidding process or otherwise seek additional officers to acquire Intermagnetics, and by failing to provide full disclosure to certain material financial information." In their filing, the company noted that these lawsuits had been resolved, but gave no details. Shareholders who are on record as of August 16th will be able to vote on the proposed merger on September 26th.

Their proxy statement outlined the details of the transaction:

"If our stockholders adopt the merger agreement and the merger is subsequently completed, you will be entitled to receive $27.50 in cash, without interest, for each share of Intermagnetics common stock you own, unless you have properly exercised your appraisal rights. On June 14, 2006, the last full trading day prior to the public announcement of the merger agreement, the closing price of our common stock was $21.38 per share."

The lawsuits may have had some merit. The buyout premium in this case is only 28% - at a price less than a recent 52 week high made by the company. Why wasn't a bidding process announced so other suitors could potentially offer a greater amount to current shareholders? The board of directors, who approved this plan, are supposed to always act in the best interest of shareholders...

With these lawsuits settled, the company only needs a proxy vote and approval from the EU before moving forward. With a 70% institutional ownership stake, it is likely that the merger will move ahead as planned.

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Activist hedge fund Pirate Capital announced its final slate of nominees for the Cutter & Buck, Inc. (NDAQ:CBUK) board of directors today in their ammended 13D filing with the SEC. According to the filing:

"On August 18, 2006, pursuant to discussions between representatives of the Issuer and representatives of the Reporting Persons, the Issuer notified the Reporting Persons of its decision to include David A. Lorber, a Director and Senior Investment Analyst at Pirate Capital, amongst the Issuer's eight nominees for election as directors at the Issuer's 2006 annual meeting of shareholders (the "Annual Meeting"). Concurrently, the Issuer also notified the Reporting Persons of its decision to include Thomas O'Riordan, an industry expert recommended to it by the Reporting Persons and considered by the Governance Committee of the Issuer, amongst the Issuer's eight nominees for election as directors at the Annual Meeting. Mr. O'Riordan is a consultant to the footwear, apparel and sporting goods industries and was recently a senior executive and director with Fila. Mr O'Riordan is also a member of the Board of Directors of Innovo Group, a publicly traded apparel company."

Pirate also revealed a 13.5% stake in the company, amassed since December 10, 2004, when it first announced it's ownership in the stock. After buying at the top and watching the stock sink from the mid-14s to it's current level below $10, the fund is now ready to step in and unlock shareholder value. Although it may be a long-term play, Pirate Capital has a very skilled management team and a high rate of success when it comes to unlocking shareholder value through turnarounds or liquidations. Given their likely averaged price, you can be sure that they are looking for a significant premium to the current price. CBUK is definitely a good stock to keep an eye on when it comes closer to the board's election at the upcoming shareholder's meeting.

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Great Wolf Resorts, Inc. (NDAQ:WOLF) has recently drawed some confusion from investors after an August 15th 13D filing made by Hayground Capital. The confusion arose when Hayground - the Wolf's largest shareholder - announced the the company had contacted him seeking advice regarding a possible sale of the company:

"On August 9, 2006, Bruce Neviaser,  Chairman of the board of directors (the "Board") of the Issuer,  called Mr. Ader to elicit Mr. Ader's views  regarding a possible sale of the Issuer.  Mr. Neviaser  expressed his belief that the Issuer has a worth of at least $16 per share of Common  Stock  and  sought  Mr.  Ader's advice as to which  investment  banking firm to contact and how best to go about an  organized a sale of the Issuer as a way to maximize  the value of the Common Stock for all  shareholders.  Mr.  Ader  expressed  his strong  support  for the Issuer's  engagement of an investment  banking firm to explore a sale and stated that any one of a number of major investment  banks could add substantial  value in conducting an organized sale process."

The stock immediately jumped from $11 to $12 on this announcement. (Side note: The next day, at around 2pm, there was a Form 4 filed with the SEC by Bruce Neviaser - the same man who had interest in a possible sale of the company and insisted it was worth at least $16 - announcing a sale of 3,500 shares he owned. Moreover, this same man had told Mr. Ader that he intended to sell 200,000 additional shares on the open market, despite the buyout proposition.) A day later, the company then released a press release via an 8K filing (PR) saying the following:

"Great Wolf Resorts, Inc. (NASDAQ: WOLF), America’s leading family of indoor waterpark resorts, today said that the company has no plans to sell the company or engage an investment banking firm to explore the possible sale of the company. Yesterday, the company received a letter from Hayground Cove Asset Management LLC, a shareholder, in which Hayground encouraged the company’s Board of Directors to engage an investment banker to explore a sale of Great Wolf Resorts."

If the board wasn't interested in a sale of the company, why did they contact Mr. Ader? Apparently, the board of directors "routinely discusses prospects for Great Wolf Resorts", which included a possible sale of the company. That's fine, but just how serious is Hayground in seeking a sale of the company? Well, they had this to say in the 13D filing:

"By letter  dated  August 14, 2006 to the Board,  Mr. Ader  reiterated the highlights of his August 9 discussion with Mr. Neviaser and articulated his view that at this time shareholder value would be maximized by a sale of the Issuer. He encouraged the Board to take immediate steps to unlock long-term  shareholder value by retaining an investment banking firm to explore the sale of the Issuer. Mr. Ader noted that the Issuer's two  significant earnings  shortfalls in 2005 caused serious damage to  management's  credibility  and the Issuer's  overall reputation  with  investors, resulting  in  the  Common  Stock trading  at  a significant  discount to underlying  asset value.  Mr. Ader requested a meeting with the Board to discuss the Reporting  Person's views  regarding  valuation of the  Issuer." (A copy of the letter can be found attached to the filing link above)

With less than 9% of the float, Mr. Ader might have some difficulty starting any kind of proxy battle; however, if he did manage to get ahold of more shares he might be able to convince enough investors to force a sale, especially given the company's poor performance in recent quarters. This stock is definitely a good one to keep on the radar as this story unfolds.

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Altria Group (NYSE:MO) shares rose today after the tobacco industry's legal picture became a bit clearer. The judge in the government's racketeering lawsuit stated the tobacco companies were deceiving the public, however, there were no significant fines attached to the ruling. Any other stipulations found in the 1600 page ruling will likely be appealed in the appelate courts. The judgement clears the way for Altria to spin-off its 88% stake in Kraft Foods (NYSE:KFT), which moved down on the news. The timetable for this action is likely to be between 10 and 14 weeks.

Spinoffs present an interesting opportunity for investors. When Altria spins off its stake in Kraft, it will distribute its 88% stake in Kraft to its own shareholders. Typically, a significant portion of these shareholders will sell their shares of Kraft because they are only interested in Altria. Many larger funds that acquire a large number of shares may also not want to hold Kraft. This results in selling pressure that has nothing to do with the underlying value of Kraft Foods. Even more, Kraft has an existing float that is being publicly traded. Some of these investors may sell off their shares in anticipation of this selling, which could result in a windfall. When and if this occurs, there will be many cheap shares available on the market for enterprising investors! The key to seeing if any of this will happen is watching Altria Group's SEC filings, particularly their Form 10.

Many people are also very bullish on the tobacco sector in general. This announcement should allow investors to remove the majority of the risk premium that was associated with this lawsuit, which should result in an increased share price. Many analysts are calling for $95 - $100 per share.

Advancis Pharmaceutical Corporation (NDAQ:AVNC) has been a rollercoaster ride for investors since it IPO'd back in 2003 at $9/share. Since then it has plummeted to under $1 before recently rebounding to over $4. What's causing this volatility? Well, the company is focused on the development of a new drug delivery system for antibiotics, known as PULSYS. This system essentially releases "bursts" of antibiotics over time instead of releasing it all at once. The theory was that this method would not only fight infections more effectively, but also reduce the risk of long-term immunity to antibiotics.

The company ran into trouble, however, when their clinical trials failed in mid-2004. The tests performed at the time concluded that the differences between PULSYS and normal drug delivery methods were not statistically significant. This news devastated investors as the stock sank from $8 to $3. Luckily, the company had acquired the rights to sell Keflex along with a $12m credit facility, which allowed them to stay afloat while they re-applied for approval. Recently on August 10th, the company redeemed themselves when it's Phase III trials of Amoxicillin PULSYS achieved its endpoints (showed statistical significance), and the stock reached a new 52-wk high. In a press release, the CEO said:

"'The positive outcome of this trial provides proof-of-concept that PULSYS antibiotic dosing is effective in eradicating streptococcal bacteria in humans,' stated Edward Rudnic, president and CEO of Advancis. 'If approved for marketing, we believe our once-daily version of amoxicillin would represent a major advance in the most widely used antibiotic in the U.S. and would be the first and only once-daily amoxicillin therapy approved for marketing in the United States.'"

This proof-of-concept has apparently attracted new investors. A 13G filing with the SEC on August 17th revealed a 17% ownership stake by Deerfield Capital Management through a hedge fund that invests in special opportunities. Note that this was bought through five different vehicals, so the reporting was not required until at least one of them reached 5%.

Although the company's recent 10Q was lackluster, these recent developments finally help prove that Advancis' technology does work. If it continues this success, it may be able to revolutionize the antibiotics market - a $27b market - through its more efficient drug delivery system. The company definitely has a long way to go, but it's a great stock to put on the radar.

Dell Inc. (NDAQ:DELL) fell after hours today after it released its 8K filing to the SEC, which announced disappointing earnings and revealed that it is currently involved in an informal SEC investigation into the ways it booked revenue during the past year.

Dell's earnings were cut in half from $0.41/share a year ago to just $0.22/share today, which was below analyst expectations. The company attributed this to "aggressive pricing in a slower market". Perhaps as a consequence, Dells market share did increase by 6% to 19.3% - most of that growth coming from outside of the United States. The company's CEO said the following:

"While we are disappointed with the results for the quarter, we are taking the necessary actions to correct missteps and improve our results for the long term," said Kevin Rollins, Dell chief executive officer. "Key actions include accelerating cost initiatives, increasing investments in service and support, and better pricing management."

Meanwhile, the company also announced an SEC investigation:

"In August 2005, Dell received notice from the U.S. Securities and Exchange Commission that it was conducting an informal investigation of the company. The notice stated that the investigation is not an indication that any violations of law have occurred. The SEC has requested information relating to revenue recognition and other accounting and financial reporting matters for certain past fiscal years, and Dell has been cooperating. In the course of responding to the requests, the company recently discovered information that raises potential issues relating to certain periods prior to fiscal 2006. While the company does not believe that these issues have had or will have any material impact on its financial position or the reported results of operations for the relevant years, the company's audit committee, upon the recommendation of management, has initiated an independent investigation. Management is committed to addressing any questions, concerns or issues the SEC or the audit committee may have."

Note that companies are not required to disclose anything that is not material. As a result, this is the first time we've heard of this SEC investigation dating back to August of 2005. The cause for concern is that the company's internal investigation has "discovered information that raises potential issues relating to certain periods prior to fiscal 2006". Whether or not this will have a material affect on the company has yet to be seen; however, it is something that will be held over Dell's head until resolved.

Currently, Dell is trading at a PE of around 19, which is at a discount to their industry and most of their peers. Provided Dell is able to find itself innocent of any wrong doings with the SEC and recover from its pricing mistakes, it could represent a great buy at these levels.

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TriPath Imaging Inc. (NDAQ:TPTH) was bought out by Becton, Dickinson and Co. (N:BDX) on Monday for $9.25/share in an all-cash transaction. According to the company's 13D filing with the SEC:

"BD has elected to convert its filing on Schedule 13G, filed with the Securities and Exchange Commission (the "SEC") on August 8, 2001, into a filing on this Schedule 13D to reflect its decision on August 14, 2006 to submit to the Issuer's Board of Directors a letter, dated August 14, 2006 (the "Proposal Letter") containing a non-binding proposal to acquire all of the issued and outstanding Common Stock of the Issuer, that BD does not currently own, at a valuation of $9.25 per share in cash in a merger transaction (the "Proposal"). The Proposal also contemplates the payment of such cash consideration to all holders of existing options, stock appreciation rights and warrants granted by the Issuer."

This announcement came as a suprise to many shareholders, as the stock doubled on Monday to its current $8.87 level (still a 4% discount to the buyout price). Most of the suprise was due to the fact that BDX announced this in their initial 13D filing! So, there was no prior evidence that BDX was even remotely interested in TPTH shares before Monday... Under the agreement, the acquisition won't be going through until the first quarter of 2007, which leaves plenty of time for other companies to place a bid. So, TPTH is a great stock to put on the radar incase anything else does come along. Any future bids would likely be tipped off by BDX moving up their deadline or strange price activity.

This acquisition also illustrates a key concept that goes along with trading based on insider ownership - a way to tell if the buyers are interested in acquiring the company. One hint, or tip-off, in this case was the massive insider selling that suddenly stopped shortly before this acquisition. A quick look at their SEC filings shows massive selling via Form 4s before and during June. These sales occurred almost every day like clockwork! Suddenly, on June 2nd, they stopped and never resumed. So, what happened? The law says that insiders are not allowed to buy or sell when they know their company would receive an offer - this would be insider trading. Although the 13D filed was the first indication of a third party interested in acquisition, the suddenly decline in insider selling could have tipped off the fact that something was going on that would benefit the company's shareholders. This is something to watch if you are holding shares in a company that could be a potential acquisition target.

InnerWorkings, Inc. (NDAQ:INWK) IPO'd today at $9/share, raising over $95m to help fund its future growth. The printing procurement provider's stock quickly rose to over $10.80 today, representing a gain of over 19% on the day. Is this a stock to be looking at? Although it is difficult to value a stock that has just IPO'd, the company's S-1 filing with the SEC can give us a good idea of what to expect.

InnerWorkings was formed in 2001 to provide an outsourcing platform for printing products though its web portal. Since it began operations in 2002, the company has enlisted over 2,700 suppliers in its database and serves over 1,100 clients (with over 97,000 bids). The company's financials also show strong growth of about 148% per year, with revenues moving from $5m in 2002 to $76.9m in 2005. How is the industry? Well according to their filing:

"Our business of providing print procurement solutions intersects two large and growing industries, commercial printing and business process outsourcing, or BPO. Total shipments in the worldwide commercial print industry were projected to be approximately $367 billion in 2005 and are expected to increase by an average of $8 billion per year through 2009, according to a 2005 Datamonitor global commercial printing industry profile. To become more competitive, many businesses seek to focus on core competencies and outsource non-core business functions, such as print procurement. According to a 2005 IDC global BPO forecast, the worldwide market for BPO is estimated to grow from $422 billion in 2005 to $641 billion in 2009, representing a compound annual growth rate of 11%."

One of the key factors to consider when looking at a new company's potential is its "disruptive" capability. High growth companies typically provide a new technology that disrupts the current market place. For example, Dell used the Internet and commoditization to disrupt the market for PCs. InnerWorkings believes that its technology will disrupt the printing industry by further commoditizing its products and better connecting products with customers (not unlike what Dell did to PCs). In the company's S-1 filing, they stated:

"Our fully-integrated print procurement solution disrupts the traditional print supply chain by aggregating the collective print demand of our clients and greatly increasing the number of suppliers that can efficiently bid for our clients’ print jobs. Our print procurement costs are often 30 to 50% less than the print expenditures historically incurred by our clients, and we believe that we offer a compelling value proposition to our clients by passing on to them a considerable portion of such cost savings. In addition, our solution reduces the amount of internal resources our clients must dedicate to print procurement, accelerates the print procurement process and consistently delivers a high-quality product. We believe that our business model, which is unencumbered by commercial print production assets, offers the first enterprise solution capable of meeting the entire print procurement needs of corporate clients."

One of the major risk factors associated with the business is competition coming into the market - especially given its potential. The two major factors combatting this are the company's proprietary technology and their large supplier network. The company also has a very capable management team and a scalable business model on their side.

Overall, the company is in a solid position fundamentally to disrupt the market for print outsourcing; however, the limited financial data makes it difficult to come up with a valuation for the company, especially given the fact that it has only been in operation since 2002. This company is definitely worth keeping an eye on, however, as we learn more about it in future filings with the SEC.

Tri-Continental Corp (NYSE:TY), a closed-end mutual fund, may have a new board come September 28th if Art Lipson's Western Investment Hedge Partners is able to convince shareholders to nominate their slate of directors. On August 9th, Mr. Lipson sent a letter to shareholders, also filed with the SEC in form 14A, to inform shareholders of his intentions. In this letter, Mr. Lipson gives for reasons for change:

• William Morris, Tri-Continental's Chairman, is named in an investigation by the New York State Attorney General. As you probably know, the New York State Attorney General has determined to commence against Seligman an action for fraud relating to alleged mutual fund timing activities in certain funds managed by Seligman. The Attorney General has alleged that in excess of $80 million was "diluted" from the value of these funds during Mr. Morris's tenure. Moreover, Morningstar, the well-respected rating company for mutual funds, recently rated the Seligman family of open-end mutual funds with an "F" for corporate governance, the lowest possible grade.
  
• Tri-Continental underperformed the S&P 500 index in 12 of the last 15 years. The performance by Seligman as manager during the last 15 years, under Mr. Morris's direction, has been abysmal. During this period, the S&P 500 index returns were 56% higher than Tri-Continental's returns.
  
• Tri-Continental's proxy fails to disclose, (a) the cost to stockholders of the last election; (b) the actual investment performance of Tri-Continental for the first six months of 2006 (which again lags the S&P 500 index); and (c) the fact that its Chairman, William Morris, and its President, Chief Executive Officer and Director, Brian Zino, have been named in the investigation by the New York State Attorney General.
• The Company needs an independent set of eyes to protect our investment and to see to it that Seligman does the job that it is paid to do.

The company fired back by accusing Art of attempting to open-end or liquidate the company. Mr. Lipson insists that this is a scare-tactic, and he has no intention of open-ending or liquidating Tri-Continental, alleging that the company is intentionally misrepresenting his position. In his letter, Art stated:

"I am a fellow stockholder and I am leading a group that has owned Tri-Continental stock since 1999. We care about Tri-Continental's performance certainly as much as anyone else since we are the largest stockholder ... I have listened to stockholder concerns and want to make it clear that, despite statements made by the Tri-Continental Board, my goal is not to open-end or liquidate Tri-Continental. When Tri-Continental tells you to the contrary it is misstating my position. I am committed to improving Tri-Continental to return it to being an excellent company rather than being sub-par."

If Mr. Lipson is successful in overtaking the board, it will be good new to shareholders, who have been forced to suffer through years of sub-par returns under the old board. The new candidates are all well qualified and could help turn around the company.

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