After a quick double in price last week Cypress Biosciences (NDAQ:CYPB) is again in the news after Black Horse Capital Advisors disclosed a 1.2 million share stake and said it opposed the company's plan to sell 4.7 million shares of stock in a public offering and urged the company to consider adopting a share buyback plan instead.

The activist hedge fund said it was pleased with the company's very successful Phase III results Milnacipran in Fibromyalgia Syndrome and suggested that the drug should provide the company with substantial revenues in the future. However, the company now has too much cash - specifically, $100 million in cash with no debt and a low cash burn rate. Combine this with a successful late stage drug and it is difficult to see why the company would need to issue more shares to raise money!

What does this mean for investors? Well, a large scale share buyback combined with the avoidance of issuing any new shares would likely increase the company's share price and reward investors with cash that is simply being unused right now. And Black Horse also hinted that if these demands are not followed they may consider other options available to them as large shareholders - presumably a proxy fight. Combined, these factors make CYPB a stock worth watching!

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PDL Biopharma Inc. (NDAQ:PDLI) moved up marginally after activist investor Third Point disclosed a 9.8% stake in the company and asked the unconflicted directors of PDL BioPharma to conclude their investigation into CEO McDade's suspected ethical and business breaches as quickly as possible. The hedge fund also nominated BioMarin Pharmaceuticals CEO Jean-Jacques Bienaime to their proposed slate of directors.

The letter address to board members was a follow up to one sent out privately three weeks earlier. In the letter, Third Point suggested that shareholders could best be served through the termination of CEO McDade, the addition of three shareholder representatives to the company's board, and finally the hiring of an investment bank to explore strategic options for the company.

The adoption of these three recommendations would substantially increase the company's share price. Obviously, if the company formally announced that it was exploring a possible sale it would cause a quick jump while the firing of McDade and inclusion of shareholder representation on the board is definition bullish in the long-term.

The problem is simply the McDade has tight control over the board as well as management - a classic agency problem. The only way to effect change may be through a proxy fight, which is always a possibility with Third Point. Combined, these factors make PDLI a stock worth watching!

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The Bancroft family, who through a dual-class share structure control 64.2% of Dow Jones & Co. (NYSE: DJ) votes, agreed to meet with Rupert Murdoch's News Corp. (NYSE: NWS) about his unsolicited $5.6 billion bid for the company.

This will be music to shareholders' ears as the Bancrofts had initially rejected News Corp.'s offer exactly one month ago. It has been widely speculated that the bid for the company was too substantial to not seriously consider as it represented a 65% premium over the share price at the time.

Critics of the proposed buyout warn that the Wall Street Journal, the centerpiece of Dow Jones & Co.'s holdings and certainly Murdoch's most coveted prize in the deal, would suffer from a decline in the quality and neutrality of the writing. In fact, placing journalistic integrity before profits, if necessary, is part of the reason Dow Jones & Co. has a dual-class share structure that allows the Bancrofts to control its fate.

Michael B. Elefante, a director of Dow Jones & Co. and a representative of the Bancrofts, said in a statement that the meeting with News Corp. will explore if "it will be possible to ensure the level of commitment to editorial independence, integrity and journalistic that is the hallmark of Dow Jones."

Editorial independence aside, Dow Jones & Co. is suffering from the same problems ailing the entire newspaper industry as readership and thus advertising slows or declines. As Ed Atorino, an analyst at Benchmark Co., said, "I think [the Bancrofts] are facing the reality of the situation -- that this [bid] is a one-time-only event." See, money talks.

Dow Jones & Co. is soaring to nearly $61 a share on the news, while News Corp. is up a slight .72%.

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Griffon Corporation (NYSE:GFF) shares moved up $1.54, or 6.97%, to $23.65 today after Clinton Group disclosed an 8.5% stake in the company and suggested that the company undergo a recapitalization. The proposal would tender 50% of Griffon's outstanding shares at a price of $25 per share, but has yet to receive a meaningful response from the company.

Clinton Groups proposal is contingent on financing from two lien bank loans and financing from the hedge fund and its affiliates. The proposal would also require the hedge fund to institute several of its own board members and implement a restructuring plan aimed at improving the profitability of Griffon's businesses.

In the end, Clinton Group believes that a recapitalization of the company combined with measures designed to reduce expenditures and improve the bottom line would drastically increase the stock's valuation. Using a multiple of 15x price to earnings on a tax affected $20 million of savings divided by a share count 43% less than the current number yields in excess of $9 per share in incremental value. Clearly, this would be great news for shareholders and makes GFF a stock worth watching closely!

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Motorola Inc. (NYSE: MOT), the wireless handset and cell phone maker, announced yesterday that it would be laying-off another 4,000 workers, in addition to the 3,500 job cuts it announced in January, as part of its continuing efforts to manage costs.

These new lay-offs, in conjunction with other cost-cutting measures, are predicted to save the company $600 million in 2008, and the previously announced workforce reduction will ultimately eliminate another $400 million in costs.

The continuing efforts at Motorola to tighten the corporate belt are described by company CFO Tom Meredith as an "update to the commitment...to drive out additional costs," an initiative announced at the company's first-quarter conference call.

Motorola is in need of cost controls as it posted a net loss in the first-quarter of this year in the face of declining handset sales and lackluster new cell phone models. The poor performance of the company's stock, only a dollar off its 52-week low, led activist billionaire investor Carl Icahn, who has a 2.9% stake in the company, to seek a seat on its board in elections this month.

Icahn lost the election to the company-backed candidate, John A. White, by a margin of about 13% but still received more than 700 million votes in the process. The election followed a series of exchanges, primarily in letters to shareholders, between Icahn and company management in which Icahn attacked what he saw as mismanagement of the company, especially in comparison to rival Nokia (NYSE: NOK).

Motorola stock is basically unmoved, down .27%, on the news today.

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Dendreon (NDAQ:DNDN) shares rocketed $2.72, or 40.36%, to $9.46 in early trading today after the company received confirmation that the FDA will accept either a positive interim or final analysis of survival from its ongoing IMPACT study to supplement the Biologics License Application for Provenge. We began covering this story on May 21st when we noted the widespread support for the drug from doctors and patients alike. The problem was that the FDA said it would delay the approval of the drug for some time - which could signal trouble for investors. Perhaps the FDA felt the heat from supporters or simply changed its mind, but regardless this latest press release is very bullish for the company.

Today's news that the FDA will accept a final analyiss of survival to supplement the BLA for Provenge indicates that they may significantly reduce this delay. Obviously, if the delay is reduced or eliminated and Provenge is approved for use, it would mean significant share appreciation for investors in DNDN. The drug targets a large underserved market that could generate substantial revenues over the long-term and perhaps even make the company a takeover target for a larger pharma player. Combined, these factors make DNDN a stock that is certainly worth watching!

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Jo-Ann Stores (NYSE:JAS) moved up $0.99, or 3.29%, to $31.05 today after the company announced positive earnings for the quarter. The specialty retailer announced a net loss of $0.07 per diluted share compared to $0.28 per diluted share a year ago. Same-store sales - or comps - increased 1.8% this quarter compared to a loss of 3.9% a year ago.

Investors are also carefully watching the bidding process for the company, which may end up topping $1 billion. The group of bidders reportedly consists of middle-market private equity firms including Leonard Green & Partners and Freeman Spologi & Co. There are also reports that larger firms like Blackstone may be looking at the company. Final bids, however, are expected to be in by June when Lehman Brothers will then evaluate them along with the board of directors.

But just how much could the company fetch? Well, the company's improving margins and growth prospects may certainly increase the final bidding price. The company's main competitor, Michael's Stores, was also recently acquired for 12.8x EBITDA and a 30% premium to the stock's closing price on the day it announced that it was exploring strategic alternatives. These metrics seem to confirm the fact that the Jo-Ann could fetch a nice premium. This makes JAS a stock worth watching!

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ESS Technology (NDAQ:ESST) shares rose over 8% this week after Riley Investment Management disclosed a 1.3m share stake in the company and expressed their concerns over the company's management and valuation. The company operates in the semiconductor industry and services the consumer electronics and digital media marketplace. These have been the subject of many recent takeover attempts and could be an industry for further consolidation.

Riley believes that the shares are undervalued and that the current restructuring should be expedited with the ultimate conclusion being a liquidation of the company. Ultimately, the activist hedge fund believes that a liquidation of the company could result in a 100% appreciation of ESST shares; however, that value deteriorates every day the company functions in its current structure. The fund is also concerned that the company may make an acquisition that will further deteriorate the remaining equity value. Consequently, Riley will issue one more letter to the company's board describing their position in greater detail while threatening to replace members of the board if no action is taken. Combined, this is great news for shareholders as it could mean a significant increase in value over the short term. This makes ESST a stock worth watching!

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Interactive Brokers Group (NYSE:IBKR) shares plummeted $1.98, or 7.19%, to $25.57 in early trading today after the company released lower first quarter earnings on higher revenues. The newly IPO'd options firm posted net income of 31 cents per share compared to 34 cents per share one year ago.

Why is this so troubling for investors? Well, the brokerage market appears to be extremely hot right now with almost all competitors posting record gains while IBKR was the first to be stalling. The brokerage clearly experienced some of this upside in the market by increasing their trading volume by 40% quarter over quarter but somehow managed to report declining earnings.

Interactive Brokers reported declining revenues from trading gains and other income while interest income and revenues from commissions and fees rose. These numbers suggest that the brokerage raised its fees in order to compensate for lack of bottom-line net income growth - a negative sign to many investors. Whether this is a one-time occurrence or a larger slowdown in the brokerage industry remains to be seen; however, this stock is definitely one to watch.

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Avaya (NYSE:AV) share jumped $1.94, or 14.19%, to $15.61 after reports surfaced that the company is in buyout talks with private equity firm Silver Lake Partners. The Wall Street Journal report also said that Nortel could step up as a bidder, citing people familiar with the situation.

These days private equity buyout rumors tend to dominate the market headlines and separating fact from rumor is imperative to success. So, what facts support an Avaya buyout? Well, the company was already in buyout talks with Nortel just last month, but the deal fell through after the two parties could not agree on the cash/equity deal structure. The company also has strong cash flows and relatively little debt, making it an ideal acquisition in the fast-growing VOIP market. And finally, Avaya also postponed its May 31st analyst conference, which many see as an indication that the company may very well be in buyout talks.

Combined, these series of events along with a WSJ report citing an exact hedge fund as suitor gives some credibility to this rumor. Given the interest by Nortel, this potential acquisition by a financial buyer could be an attempt to take over the company simply to resell it at a higher multiple to larger strategic buyers in the near future. This is likely why Nortel or other strategic buyers could place their own bids to attempt to get the company for cheaper. Regardless, this is definitely a stock to keep an eye on as the situation unfolds!

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