Banta Corporation (NYSE:BN) announced yesterday that they had received a letter from Cenveo dated September 20th, in which Cenveo proposed a business combination transaction involving the company. Banta said that it "is in the process of reviewing the proposal and will respond to Cenveo as appropriate in due course". What did this letter say? Well, Cenveo had a few kind words for Banta's Board regarding the transaction:

"As you might expect, following our prior proposals to acquire Banta, we were amused to read in your press release on September 14th that Banta has adopted "strategic initiatives" to "create value for shareholders." At Cenveo, we are always working to create value for shareholders and do not wait until we have received proposals from third parties to do so

We were also disappointed to hear on your carnival-like conference call that you continue to refer to Cenveo's $47.00 per share fully-financed, all-cash proposal for Banta's shares as "illusory". To reiterate what I stated in my letter of September 5th, we have obtained committed financing to complete this acquisition from Lehman Brothers and Wachovia ... I personally believe that you and the Banta board have breached your fiduciary duties to shareholders by taking actions to entrench yourself by not responding to my September 5, 2006 letter and the $47.00 per share proposal to purchase Banta.

Further, to say, as you did on your call, that we were unable to reach an agreement on the terms of a "standard" confidentiality agreement is a joke. We have offered to meet with you and to provide you with information about our commitment from Lehman Brothers and Wachovia WITHOUT OBTAINING ANY CONFIDENTIAL INFORMATION FROM YOU. Why do you need a confidentiality agreement when we are not asking for any confidential information at this time?

The fact that you and your board continue to hide behind your poison pill is in my view 110% un-American. A level playing field is required in order to permit Banta shareholders to decide who manages their company, not a poison pill. As you stated on your most recent conference call, your poison pill is in place to "make sure that your shareholders have the benefit of long-term look at the future." Shareholders now have had plenty of time to review your plan. Therefore, the pill is no longer necessary and we believe it is the board's fiduciary obligation to remove the poison pill and let the shareholders decide the future of Banta."

But is $47 a good deal for shareholders? Well, the stock was trading at around $50 before the company durastically lowered is FY 2006 guidance in July before raising them suddenly in September. However it is difficult to argue that the company is undervalued right now. Although it has a PE of around 17x, it has a PEG of almost 2.87, which is highly overvalued. The company does have a strong cash position and low debt; however, the company is still trading well above its enterprise value. Either way you look at it, $47 is a good price for this stock unless management is capable of executing some other plan to unlock shareholder value in the near term, which doesn't appear to be the case.

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DivX, Inc. (NDAQ:DIVX) is up 13% in mid-day trading today on its debut on the NASDAQ. Those familiar with technology know DivX very well as one of the most popular codecs on the market for compressing video. But the company also licenses its technologies to consumer hardware device manufacturers and certifies their products to ensure the interoperable support of DivX-encoded content.

Let's take a look at whether or not the company is a good buy... Financially, Divx has done extremely well. The companies revenues tripled between 2003 and 2004, and more than doubled between 2004 and 2005. Notably, the company also achieved profitability in 2005 with a net income of $2,295,000 or $0.05 per share (diluted). As of December 31, 2005, the company also had a strong cash position of over $25 million with only $1.2 million in debt and a deficit of $19.4 million. This is a rather healthy balance sheet for a technology company that is just IPO'ing. But are the revenues sustainable? First, let's look at where they are coming from; according to their S-1 filing:

"We derive most of our revenue from the licensing of our technologies to consumer hardware device manufacturers, software vendors and consumers. We derived 81%, 75% and 55% of our total revenues from licensing our technology in 2005, 2004 and 2003, respectively ... In the year ended December 31, 2005, Philips accounted for approximately 13% of our total revenues, and our top 10 licensees by revenue accounted for approximately 41% of our total revenues."

The company also relies on an agreement with Google:

"Revenues under the Google agreement represented approximately 15% of our total revenues in 2005. We currently include Google software in both the basic and enhanced versions of our software that we make available to consumers at no cost from our website. In exchange for offering the included Google software to our consumers, and the subsequent activation of the software by those consumers, Google pays us royalties based on specific performance targets."

At first glance, this seems like bad news. With an increasing amount of their total revenues coming from one market (licensing) and only a few key customers, there is a risk that these deals could go bad, which would significantly impact the company's bottom line. However, as long as the DivX brand name remains strong and their technology keeps evolving, it should not be difficult for the company to retain these contracts. Many public companies have survived with non-diversified revenue streams, including Google! However, it is important for investors to watch the market for competitors and keep an eye on the revenue numbers in the future.

Overall, DivX appears to be a relatively stable company now with its main risk being in non-diversified revenue streams. The shares are trading at a premium now after the IPO, but the company could make a great buy in the near future after the shares settle down. It is a great stock to keep an eye on!

Tribune Company (NYSE:TRB) shares are up over 5% today talk of a possible LBO as the Board contemplates the company's future direction. The company has drawn a lot of criticism by shareholders close to the company after slowly trending from $50 in 2004 to just $30 per share now. Specifically, Tribune has been taking a lot of heat from its second largest shareholder - Chandler Family Trusts - especially after the company failed in its bid to buyback of 25% of its outstanding shares a couple months ago. After this, Chandler Family Trusts suggested that the company spin-off its TV division or putting the entire company up for sale.

It appears that the Board is now acting on this advice... The WSJ is reporting that the company is considering either a leveraged buyout (LBO) in an effort to take the company private or spinning off its TV group. Either situation would generate value for shareholders, as LBOs come at a premium to the market price while spinoffs generally outperform the market. While nothing is certain now, this is an interesting situation that is definitely worth watching.

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Pier 1 Imports, Inc. (NYSE:PIR) revealed today in a 13D filing with the SEC that Jakup a Dul Jacobsen and Lagerinn ehf now hold 9.82% of the company. The filing also revealed an even more interesting fact - these two parties entered a confidentiality agreement with the company, during which they will obtain "evaluation material":

"On September 19, 2006, Lagerinn ehf ("Lagerinn") and the Issuer entered into a Confidentiality Agreement (the "Confidentiality Agreement"), a copy of which is attached hereto as Exhibit G. Pursuant to the terms of the Confidentiality Agreement and in connection with Lagerinn's consideration of a possible negotiated transaction with the Issuer, the Issuer agreed to make available to Lagerinn certain Evaluation Material (as defined in the Confidentiality Agreement)."

It is worth noting that this group of investors is the same one that bought Pier 1's England subsidiary back in March of this year for $15 million. The fund also has close ties with related companies, including Linen N' Things, Cost Plus, and others. These two facts have led to investor speculation that Pier 1 may be a potential buyout or merger target, either by the fund itself or one of these related companies.

The company has been hurting ever since late 2003 when it began its decline from $25 down to its current levels around $7-8 per share. With a market cap hovering right around the company's enterprise value - the stock is decently valued, with around $1.72 per share in cash. Although the company has poor operating margins and six straight quarters of losses, it's brand and scale might make it a potentially valuable aquisition for a related retailer. This is all speculation at this point; however, the stock is definitely worth watching as the story unfolds. Pier 1 is up over 8% on the news.

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Riverbed Technologies, Inc. (NDAQ:RVBD) are up over 50% today in the company's debut on the NASDAQ. This move comes after the stock had already priced above its expected range of $7.00 to $8.50, by IPO'ing at $9.75. Why all the excitement? Well, Riverbed has developed unique technology that may disrupt an established market - something investors love to hear. According to their S-1 filing with the SEC:

"Riverbed® has developed an innovative and comprehensive solution to the fundamental problems of wide-area distributed computing. Historically, computing within an organization across wide area networks (WANs) has been plagued by poor performance, IT complexity and high cost. Our Steelhead® appliances enable our customers to improve the performance of their applications and access to their data across WANs, typically increasing transmission speeds by 5 to 50 times and in some cases up to 100 times. Our products also offer the ability to simplify IT infrastructure and realize significant capital and operational cost savings."

They also noted several specific benefits that their company's products and services offer consumers:

• accelerate performance of applications and access to data over the WAN;
• consolidate geographically distributed IT resources;
• reduce the need for WAN bandwidth;
• shorten storage back-up and replication time over the WAN;
• provide local storage for continued access to remote files during WAN failures; and
• improve productivity and reduce frustration for IT managers and end-users.

However, there is one problem with the company - they are not yet profitable:

"We have not yet achieved profitability. We experienced a net loss of $17.4 million for the year ended December 31, 2005. As of December 31, 2005, our accumulated deficit was $31.5 million. We expect to continue to incur losses, and we may not become profitable for the foreseeable future, if ever. We expect to make significant expenditures related to the development of our business, including expenditures to hire additional personnel relating to sales and marketing and technology development. In addition, as a public company, we will incur significant legal, accounting and other expenses that we did not incur as a private company. We would have to generate and sustain significantly increased revenue to achieve profitability. Our revenue growth trends in prior periods are not likely to be sustainable, and we may not achieve sufficient revenue to achieve or maintain profitability. We may incur significant losses in the future for a number of reasons, including those discussed in other risk factors and factors that we cannot foresee."

While the company's revenue growth numbers are impressive (nearly tripling year over year), the fact is that their expenses have increased at a greater rate than their revenues between 2004 and 2005 (the only measurable period in their pro-forma). So, while the company may have an innovative product that is capable of disrupting an established market, they have yet to prove that their company is capable of executing their strategy to become profitable. Although this is the case for most public companies when they first IPO (after all, they are raising money), it does make the investment significantly more risky, especially when the stock rises over 50% on its first day of trading.

Hewlett Packard (NYSE:HPQ)
8K Material Events Filing
The company received a request from the Division of Enforcement of the Securities and Exchange Commission for records and information relating to the resignation of Mr. Perkins from HP’s Board of Directors, certain Form 8-K filings with the SEC, and investigations conducted by HP or any of its directors into possible sources of leaks of HP confidential information.

Lenox Group (NYSE:LNX)
13D Filing by John Morgan and Co.
John Morgan and his associates disclosed a 7% stake in the company and expressed dissatisfaction with the Board of Directors' performance and direction of the company. Shares moved up 6% on the news.

Move Inc. (NDAQ:MOVE) is owner of Move.com and a series of other web portals designed to connecting real estate buyers and sellers, including Realtor.com - the official NAR (National Association of Realtors) portal. The stock, which was up to around $7 per share earlier in the year, is now on the rise again. So, is it a good time to buy? Let's take a look...

When looking at the macro picture surrounding the company, it is not difficult to see that there is trouble in the housing market. Rising interest rates make it more expensive to own a house because of the higher financing costs. More expensive loans end up pricing people out of the market, which reduces housing demand. The reduction in demand causes the price of houses to decrease, which is what we are currently seeing in many housing markets. The reduction in both demand and price are not good for realtors, as they must face both reduced demand for housing and a reduced commission (due to lower selling price). These two factors may decrease the deal flow seen at web portals like Move.com.

Since they operate an Internet portal as their primary business, we can partially qualify this thesis using Amazon's Alexa. This Alexa report shows the downward trend of traffic going to their main portal, Move.com. This reduction from a high of around 15 - 18 million visitors per day down to 8 - 10 million visitors per day is quite significant, and is likely at least partially attributable to the economic environment (since sales and marketing expenses were up during the same period).

There are also problems with the company itself - most notably, the fact that they don't make money (on a GAAP basis). According to their own 10K filing with the SEC:

"We have incurred net losses every year since 1993, except for modest net income in 2005, including net losses of $7.9 million and $47.1 million, for the years ended December 31, 2004 and 2003, respectively. As of June 30, 2006, we have incurred a modest net loss and have an accumulated deficit of approximately $2.0 billion ... certain business model changes that will require considerable investment with no assurances that our future financial performance will be enhanced by these new initiatives."

The most troubling issue is the fact that during the United States' largest real estate boom, the company was not only unable to turn a profit, but actually accumulated a $2 billion deficit! And now after the boom is (arguably) over, the company still retains an enterprise value (EV) of over $640 million. Even if the company is a clear market leader with an increasing share of the online real estate listings market (which is debatable), the company still faces both macro-economic and internal issues that it needs to resolve before becoming profitable. The company could also face antitrust issues relating to their exclusive relationship with NAR, assuming that the online real estate listings market continues to grow as fast as it is (expected to double by 2010). Finally, the company is in the process of changing its web portals, and the success of this depends largely on how well customers accept these new online destinations. Overall, it would be best to hold off on any investment in MOVE until the company achieves profitability and is able to demonstrate that it can drive traffic to its new portals.

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The daily digest is a new addition to the blog that highlights five of the most noteworthy forms filed with the SEC every day...

Ahold (NYSE:AHO)
On Watch for 8K Filings
The company is reportedly under pressure from hedge funds to break up the company and may be looking at a merger with Delhaize (according to Reuters), although many remain skeptical.

Eagle Materials (NYSE:EXP)
Form 4 Filing by Chairman
Chairman Laurence Hirsch revealed today that he has purchase 400,000 shares of the company's stock between $34.68 and $35.77 through the week. The stock is trading up over 12% on the news.

Imclone Systems Inc. (NDAQ:IMCL)
13D Filing by Carl Icahn and Co.
Carl Icahn disclosed a 14% stake in the company and said that he wants Director Kies to leave the Board of Directors. Shareholders recently re-elected Kies as Director while also electing Icahn as a Board member.

Marsh & McLennan Companies, Inc. (NYSE:MMC)
8K Filing Noting Putnam Valuation
Item 8.01 in the company's latest 8K filing notified investors that it was conducting a valuation of its subsidiary Putnam, citing several parties that were interested in a potential merger or acquisition of the division.

Palm, Inc. (NDAQ:PALM)
On Watch for 8K Filings
CNBC mentioned today that Palm is higher on takeover rumors. Any substance to these rumors would be found by looking for 8K material events filings or perhaps even insider buying.

Imclone Systems Inc. (NDAQ:IMCL) revealed today in a 13D/A filing with the SEC that Carl Icahn and Co. now own almost 14% of the company. The activist investor has been trying to replace the management and turn around the company for some time now. The stock continues to slowly decline as operating results fail to improve, while the company was unsuccessful in finding a buyer back in July. While the company is about even on the year, it has recently dropped from a high of $42 in May to its current levels of around $28 per share.

Carl Icahn believes that the problem lies with David Kies. In an attachment to this latest 13D filing, Mr. Icahn enclosed a letter asking the Chairman to immediately step down:

"Now that I am becoming a director of ImClone, I am asking you again for the good of ImClone and its stockholders to give up your position as Chairman of the Board. Given what I consider the sorry record of the Company under your watch, it is time for you to step aside and allow someone else to be elected. You have even admitted to me that the board has done a bad job. ImClone has been without effective leadership for almost three years.

You should recognize that your leadership of ImClone should come to an immediate end. The time has come for you to  peacefully  pass the baton to a successor who will be able to bring strong  leadership back to ImClone.  If you fail to do so, you will have thrown down the gauntlet and we will have to react accordingly."

Also in the letter, Carl Icahn noted several of Mr. Kies failures as Chairman of the company:

• ImClone has suffered as a result of its inability to attain the leadership position it should enjoy as an important biotechnology company.
• Commercialization has suffered, trials have not been sufficiently  pursued, the head and neck data was needlessly delayed, patent suits have been lost and the Company has not provided its stockholders the performance that they deserve.
• ImClone hired a President and CEO who was totally the wrong person for the position and it took the company many many months to recognize this and replace him. His replacement lasted only a few months. Now, ImClone has another interim CEO and his permanent replacement is nowhere on the scene.
• ImClone's meaningful lead relative to potential competitors has shrunk considerably and ImClone has suffered reversals such as the loss of the patent suit in the past week.

Clearly Mr. Icahn believes that many of the company's failures are attributable to Kies, which makes his removal necessary in order to unlock shareholder value. The activist investor is known for taking any actions necessary to accomplish his agenda. And with a 14% stake in the company, we can be sure that Mr. Kies will not remain with the company for very long. With new management and leadership, perhaps this company can turn itself around and once again establish itself as a leader in their market. It is definitely a stock worth keeping an eye on!

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Star Scientific Inc. (NDAQ:STSI) announced after-hours in an 8K filing with the SEC on Monday that it had received a letter from Judge Marvin J. Garbis of the U.S. District Court of Maryland regarding its longstanding patent infringement lawsuit with R.J. Reynolds Tobacco Company. The letter noted:

"I have Mr. McMillan’s letter of September 5, 2006 and understand all parties' interest in moving the case to final resolution. I shall try to issue decisions on the pending matters within a month."

What is this patent lawsuit about? According to their latest 10K filing with the SEC:

"In May 2001, Star filed a patent infringement action against RJR in the United States District Court for Maryland, Southern Division to enforce Star’s rights under U.S. Patent No. 6,202,649 (‘649 Patent), which claims a process for substantially preventing the formation of TSNAs in tobacco. On July 30, 2002, the Company filed a second patent infringement lawsuit against RJR in the same Court based on a new patent issued by the U.S. Patent and Trademark Office on July 30, 2002 (Patent No. 6,425,401). The new patent is a continuation of the ‘649 Patent, and on August 27, 2002 the two suits were consolidated."

The company also stated that it would immediately appeal if it did not win the case. Although the results of the case have yet to be unveiled, we do know there will likely be significant volatility in the wake of the decision - this makes STSI an interesting potential options volatility play. Either way, this stock is definitely worth watching, as this event is very material to the company's future.

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