The Cyberonics Corporation (NDAQ:CYBX) situation grew even more heated today after a series of communications between the Concerned Shareholder Committee front-runner Metro Capital and CYBX management. The saga began in early September when the hedge fund sent a letter to the company demanding that changes be made to the company's Board of Directors, saying: "if there was ever a question about the need for change at Cyberonics, recent events have provided an emphatic answer ... Our nominees will provide a much needed independent voice in the Boardroom, which will represent the start of the process of rebuilding shareholder value."

On Wednesday, Cyberonics responded to this proxy filing with a press release. According to the press release:

"Cyberonics met with representatives from Metropolitan Capital on June 9, 2006, in an effort to reach a cooperative solution. Shortly after that meeting, the Cyberonics Board invited Metropolitan Capital to submit the credentials for their director nominees to the Board's outside search firm for evaluation and consideration. This review is ongoing. Rather than proceeding in a cooperative fashion to the benefit of the Company and its shareholders, however, Metropolitan Capital has decided to pursue a potentially costly and disruptive proxy contest."

Today, Metro replied in another 13D/A filing with the SEC, stating: "In the interest of setting the record straight, we want to respond to a number of the misleading statements made in the press release issued by the Company last evening." So, what really happened? Let's take a look:

"The press release said that the Company met with representatives of Metropolitan Capital on June 9, 'in an effort to reach a cooperative solution.' In fact Cyberonics' representatives, Ms. Westbrook and Ms. Frank but not Mr. Cummins, met with us and many other investors, separately, in a series of meetings organized by Piper Jaffray, in an effort to support your flagging share price. The only portion of our meeting that might be construed as 'an effort to reach a cooperative solution' with us took place when the Company’s PR consultant asked us what we wanted. We responded that we wanted the Company to replace a minority of the existing Cyberonics board members with our nominees and to commit to implement long overdue corporate governance reform. It is highly misleading to imply that a special meeting took place to discuss our concerns and suggestions.

The remainder of the June 9 meeting involved the Company’s CFO, Pam Westbrook, walking us through the Company’s investor presentation (We notice that the Company’s investor presentations have been removed from the investor relations portion of the Company’s website. Does this mean that investors should no longer rely on the information in those presentations or is it simply the Company’s strategy to make it more difficult for investors to see the many examples of the Company over-promising and under-delivering?)."

What about the Company's contention that Metro decided to pursue a costly and disruptive proxy contest? The hedge fund also responded to these allegations:

"The depiction of the facts in this instance is also highly misleading because we had already provided all the information with respect to our nominees required by the Company’s advance notice provisions in the by-laws. After the June 9 meeting, we did not hear from the Company again until receiving a letter from the Company’s general counsel on July 25 (nearly two months after we provided notice to the Company of our nominations, along with the required information about our three nominees) that asked for further information about our director nominees. We responded with the requested additional information the very next day. In contrast, over the course of the last month our calls to Mr. Cummins and Ms. Westbrook have not been returned.

To be sure, we do not desire a 'costly and disruptive proxy contest.' What we want is for the Company to replace a minority of its insular board with our nominees, who will provide shareholders with the independent voice in the boardroom that this Company so desperately needs, and for the Company to commit to implement necessary corporate governance reform."

Why are shareholders so concerned about replacing the Board? A lot of the concern stems from the fact that CEO Robert Cummins has been practically minting money while shareholders have been footing large losses. An article on ExecutiveInvestigator highlights some of these concerns:

"So, just how much money is Mr. Cummins making? Well, he made the most money on June 15, 2004 when he and two other company officers netted a cool $2.5 million overnight – not bad for a day’s work! How is this possible, you ask? Well it turns out that the company just happened to receive a favorable FDA report with regards to their flagship product the day of their stock option grant. While trading was halted for the rest of us at $19.58 per share (the prior day’s closing price), they were issued 170,000 options at this price while the press release was circulated. The next day the stock opened at $34.81 per share – netting a whopping $2,589,100 overnight! Unfortunately for them, the SEC took issue and they are currently still under investigation.

However, in addition to that 'bonus', Mr. Cummins has also made an estimated $17 million in proceeds on the sale of shares received through stock option grants in addition to a substantial grant of restricted shares. This is not to mention his $800,000 per year regular salary. In fact, the executive compensation was in such excess that one board member actually resigned, saying that he 'cannot support the direction of the governance practices of the Cyberonics board, in particular its practices regarding CEO compensation and succession.'" (Read the rest here)

Clearly change is needed. Whether or not this can be done without a proxy contest remains to be seen; however, this is definitely a stock to keep an eye on as these events continue to unfold.

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Gateway, Inc. (NYSE:GTW)
13D/A Filing by Harbert Management
Harbert announced in an SEC filing today that it has raised its stake in Gateway to over 10%, after recently purchasing over 500,000 shares on September 27th. The fund also announced that it has entered into a confidentiality agreement with the company. This news comes after the company only recently rejected a $450 million bid by Hui for the company's retail operations.

ImClone Systems Inc. (NDAQ:IMCL)
13D/A Filing by Icahn and 8K Response by the Company
Carl Icahn and company sent a message to management today in an amended 13D filing stating that they were planning to move forward with their plans to solicit proxies and take over a portion of the Board. The company fired back two hours later with an 8K stating that they "are disappointed that Carl Icahn, a minority shareholder and director, is trying to seize control of the Company without paying a control premium to all ImClone Systems shareholders." The company told shareholders not to act until they have hard ImClone's side of the story.

PW Eagle (NDAQ:PWEI)
13D/A Filing by Pirate Capital
Pirate Capital revealed today that it had increased its stake in the company to 22.4%. This position represents an increasingly portion of Pirate's holdings (just over $72 million), which have recently been thinned out after it sold stake in OSI. As a result, this purchase in particular represents a strong vote of confidence on the part of Pirate management.

Imclone Systems Inc. (NDAQ:IMCL) revealed today in a 13D/A filing with the SEC today that Carl Icahn has filed his preliminary consent solicitation statement to remove Kies and others from the Board of Directors and replace them with his own nominations. This news comes after the 13.85% holder of the company announced that it would seek to remove Kies (past article).

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Talk America (NDAQ:TALK) revealed today in a 13D filing with the SEC that Sun Capital - a 13.9% owner of the company - offered to buy the company's outstanding shares. This comes one day after another majority holder complained about Cavalier's bid being too low.

According to the filing:

"The Reporting Persons delivered today to the Board of Directors of the Company a letter proposing to acquire in an all-cash merger transaction all outstanding shares of Common Stock at $9.00 per share, subject to completion of confirmatory due diligence for a maximum period of 30 days (the 'Proposal Letter')."

In the attached letter, the company gave a comprehensive overview of their bid:

"All-Cash Consideration. Sun Capital proposes to purchase for cash all of the outstanding shares of Company Common Stock for $9.00 per share (based on the Company’s public filings which reflect approximately 31.1 million shares of Common Stock outstanding on a fully diluted basis using the treasury method). As stated above, we propose that the transaction be structured as a single-step merger (although we remain flexible with respect to transaction structure to the extent an alternative structure is feasible and in the best interests of the Company’s stockholders).  Our proposal represents an approximately 11% premium to the pending Common Stock Consideration.

No Financing Contingency. Equity financing for this transaction will be provided by one or more of Sun Capital’s affiliated funds (“Funds”). As stated above, with more than $3.5 billion in capital presently under management and the ability to invest over $800 million in any single transaction, Sun Capital currently does not need to nor does it intend to partner (or “club”) with any other equity financing sources or co-investors with respect to this transaction. Financing for the proposed transaction (including all fees and expenses) would be fully committed by Sun Capital and affiliated funds at the date definitive transaction documentation is executed by the Company.

Due Diligence.  Upon execution of a confidentiality agreement, Sun Capital’s confirmatory due diligence would need to be completed to Sun Capital’s satisfaction. Such due diligence would include meetings with management and outside auditors, and a review of the Company’s books, records and legal documents by Sun Capital and its professional advisory team.  Such confirmatory due diligence would be completed in a maximum period of 30 days and definitive documentation would be completed in tandem with that time frame.

Management. It is Sun Capital’s current preference and intention to retain incumbent senior and middle management who desire to remain with the Company and join our team. It is our intention to offer appropriate cash and/or equity incentive compensation, and to provide appropriate retention programs and welfare benefits.

Execution Speed.  Sun Capital and its professional advisors are prepared to commence due diligence immediately following execution with the Company of a confidentiality agreement.  Immediately thereafter, Sun Capital would begin good faith discussions and negotiations with the Company and the Board and definitive transaction documentation would be prepared and finalized contemporaneously.

No Regulatory Delays.  As a U.S.-based private equity firm with no foreign control persons, we do not anticipate any delays in obtaining requisite regulatory approvals for the proposed transaction, including HSR, FCC and state commission licenses.  Sun Capital will work collaboratively with the Company to obtain such approvals, including making all necessary filings immediately following the signing of a definitive transaction agreement. Subject to other customary closing conditions, we would anticipate closing a transaction as promptly as possible."

The bid represents an 11% premium over the previous bid by Cavalier Telephone Corp., which drew crticism from investors for being too low at only $8.10 per share. Investors are now speculating as to whether Cavalier will start a bidding war by upping Sun's bid. It is worth noting that the company traded as high as $10 earlier this year, which means that some large investors responsible for making these decisions may still be underwater. Fundamentally, however, the company is trading significantly above its enterprise value with a forward PE of over 80x. So, whether a bidding war happens or not remains to be seen; however, this is definitely a stock to keep an eye on.

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Gateway Inc. (NYSE:GTW) announced today in a Form 4 filing with the SEC that Harbinger Capital Partners had acquired 505,700 shares on September 22 on the open market, bringing their stake up to 27,155,930. This news comes shortly afterway Gateway rejected John Hui's $450 million bid for the company's retail operations and did not comment on a possible offer to acquire all outstanding shares. It is also worth noting that Richard Snyder - a company Director - purchased 139,644 shares (about 60,000 of that being an award) with on the 19th. With Hui's second offer still on the table, a buyout at a premium to the current market price remains a possibility.

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Nabi Biopharmaceuticals (NDAQ:NABI) revealed today in a 13D/A filing with the SEC that activist hedge fund Third Point intends to "conduct shortly a consent solicitation in order to remove Mr. McLain and possibly one or more other directors from the Board of Directors". The fund also said it would "solicit consents in favor of a proposal requesting that one or more individuals named by the Reporting Persons be added to the Board to fill any vacancies created by the removal of directors". This news comes after the company expressed dissatisfaction with Chairman McLain after having difficulty obtaining financial records. If Third Point is successful in obtaining its Board seats it will likely seek "strategic alternatives" for the company, which may include an outright sale of the company.

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America Talk (NDAQ:TALK)
13D/A Filing by Flagg Street Capital
Flagg Street Capital - a 9% shareholder in the company - said today that the company's proposed buyout at $8.10/share does not reflect the full value of the company. The fund told the company that they, along with other large shareholders, would like to see a buyout at a higher price.

McDonalds Corporation (NYSE:MCD)
Company Watch
Reports surfaced today indicating that Bill Ackman of Perishing Square wants to buy $2 billion more in stock and may engage in a proxy battle to help unlock shareholder value. Perishing was involved with McDonalds in the past when they tried to convince the resturant chain to spinoff some of its real estate holdings; however, the measure failed after McDonalds instead agreed to special dividends and other measures to increase shareholder value.

Nabi Biopharmaceuticals (NDAQ:NABI)
Response to Third Point's 13D/A Filing
Nabi told investors today that it had retained the Bank of America to assist it in its efforts to seek strategic alternatives in order to unlock shareholder value. The company has been under increasing pressure lately by activist hedge fund Third Point, who criticized management's lack of action in the past and resistance to providing relevent financial information to investors.

P.H. Glatfelter (NYSE:GLT)
13D Filing by Pirate Capital
The company revealed today that activist hedge fund Pirate Capital had raised its stake in the company to 5.7%. Pirate Capital is well known as a champion of shareholders that will stop at nothing to unlock value - even if it means liquidating the company. The fund also received some press lately after it failed to disclose a series of divestures in OSI Restaurants and other holdings.

Eagle Materials, Inc. (NYSE:EXP) revealed some insider buying recently in several Form 4 filings with the SEC. On September 19th, Director Lawrence Hirsch purchased 400,000 shares on the open market in a transaction worth over $14 million - a significant amount for an individual. Richard Stewart, another director, revealed yesterday that he had also purchased 1,000 shares in a transaction worth over $35,000. Does this insider buying make sense?

Well, the company is the second largest maker of drywall - the very same industry that caught Warren Buffet's interest (however he's invested in the largest producer, USG Corp.). The stock's recent declines come as a result of the slowdown in residential construction, which accounts for 40-50% of the company's drywall sales; however, the company's commercial demand remains quite strong. Last quarter, the company saw a 27% rise in revenues and a 70% rise in earnings. Finally, the stock is trading at a P/E of just 11x with a PEG ratio of 0.20 and trading significantly below its enterprise value, all of which indicates that the company is severely undervalued.

Although the residential real estate market may not be doing so well right now, this company still benefits from the commercial side of the market and is available on the cheap! This stock is definitely worth keeping an eye on!

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Visteon Corporation (NYSE:VC) revealed today in a 13D/A filing with the SEC that Pardus Capital had increased its stake in the company to 14.1% and is also seeking Board representation. According to the 13D/A filing, Pardus is seeking to:

"continue to engage in discussions from time to time with management, the Board of Directors, other shareholders of the Issuer and other relevant parties concerning, among other things, the business, operations, board composition, management, strategy and future plans of the Issuer. In the context of these discussions, the Reporting Persons have raised with the Issuer the possibility of an individual suggested by them joining the board, and have been informed that the Issuer has taken this matter under advisement."

This news comes just as Visteon released an 8K filing announcing that they would cut their 2006 outlook and warned on second half sales:

"Johnston and Stebbins are expected to indicate that reductions to second- half customer production levels, changing vehicle mix, and other cost factors will challenge the company's financial results for the remainder of 2006. As a result, the company does not expect to meet the financial guidance targets announced on Aug. 1, 2006. The company currently expects second half product sales to be about 10 percent lower than first half product sales of $5.7 billion."

The company also took a blow yesterday when Valeo reportedly withdrew their bid for the company without explanation, after many speculated that the company was preparing to make an offer. Although this still remains a possibility, the Valeo management refused to make comments on the matter.

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Boeing Co. (NYSE:BA)
10K Watch
Boeing announced today in a press release that they had reached an agreement with FedEx (NYSE:FDX) to sell and modify almost 90 757's in a deal worth an estimated $2.6 billion. The acquisition is expected to have a strong impact on Boeing's earnings, while the startup expenses will not likely be material to the company.

Educate, Inc. (NDAQ:EEEE)
8K Filing
The company announced today that its CEO - along with several other officers and hedge funds - is offering $8 per share cash for the company in a bid to take the company private. The Board of Directors said it would review the bid in due time.

eHealth, Inc. (NDAQ:EHTH)
Ammended S-1 Filing
eHealth announced that its expected IPO price is between $10 and $12 per share with 5 million shares being sold. Lead underwriters include Morgan Stanley and Merrill Lynch.

Friendly Ice Cream Corp (AMEX:FRN)
Ammended 13D Filing
The company revealed today that The Lion Fund has consulted with the Chairman of the Board of Directors and management of the Company concerning the business, operations and future plans, and is seeking seats on the Board of Directors for Mr. Sardar Biglari and Dr. Philip L. Cooley.

Sizeler Property Investors (NYSE:SIZ)
8K Filing
Sizeler announced today that the bid from Compson Holdings is not as favorable as the previous bid from Revenue Properties Inc., taking into account all financial, legal, regulatory, and other information. This comes after an activist hedge fund involved with the company demanded a valuation.

UAL Corporation (NYSE:UAUA) - better known as United Airlines - moved up today on news that the company retained Goldman Sachs (NYSE:GS) to explore strategic alternatives. Those familiar with the situation say that the company is likely seeking a merger with Delta Airlines (DALRQ) or Continental Airlines (CAL). This news comes after UAL emerged from bankruptcy and the airline industry as a whole swung to a profit, with the help of lower fuel costs and more travellers. UAL enjoyed a share of this profit with strong performance last quarter; however, their stock remains one of the cheapest airline plays, trading at only 0.79x earnings (trailing). Any effort to unlock shareholder value could help this stock come to value at a significant premium to the current market price. Many traders are speculating that the company will require the help of a hedge fund or suitor in order to help it with any potential merger; therefore, a 13D and 8K filings would be the ones to watch as this situation unfolds.

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Titan International (NYSE:TWI) revealed on Friday that Jana had upped its stake in the company to over 22%. Although Jana didn't disclose anything noteworthy in this filing, they do have a long history in the company, which may help shed light on possible motives for the acquisitions. In October 2005, Titan was the subject of a proposed buyout at $18 per share buy One Equity Partners LLC. Jana was responsible for blocking this deal, after sending a letter to the Titan Board demanding either respond to its demands or explain why $18 per share was a fair price. Jana cited several reasons for its belief that Titan shares are undervalued at $18 in a both a SC 13D filing in October and a SC 13D/A filing with the SEC in December, where the company noted:

"... Pro-forma for the acquisition of Goodyear's agricultural tires business and adjusting for the non-operating assets, the $18 offer price represents only 5.6x trailing twelve-month EBITDA. For this reason, we believe any sale of the Company should either be postponed until the benefits of the Goodyear acquisition are realized, or alternately should be at a price which more appropriately reflects the added value that will arise following the close of this acquisition. We also would like to point out that just earlier this year Company management expressed to us a concern that a private equity buyer would attempt to buy the Company for $18, which management at the time described as less than fair value.

Other events have also strengthened our view that the proposed price falls short of fair value and fails to fully reflect the strength of both the Company and general industry trends. For example, reflecting strong industry fundamentals, the stock price of one of Titan's significant customers, Deere & Co., has increased by almost 17% since October 12, 2005, the day after One Equity's offer was announced. We believe that Titan's stock would have risen during this period as well, particularly given that the outlook for North American agricultural equipment sales continues to be strong in general, were it not being held down by One Equity's low bid. In addition, Titan Europe, in which Titan holds a 29% interest, saw its stock price increase by over 15% in the days following the announcement of an acquisition which would materially increase its size and provide significant operating synergies. We believe it is reasonable to assume that were it not for the proposed sale to One Equity at $18 per share, Titan's share price would have also seen the benefit of this acquisition by Titan Europe."

Since this time, the stock has trended down from around $20 to its current levels right around the mid $17 per share. The company has made an effort to cut costs by laying off some employees, while it has made headway in its own efforts by signing several new contracts with both Deere & Co. and Grove, among others. Whether or not the company can turn itself around remains to be seen; however, this move by Jana should be encouraging for long-term investors. This is definitely a stock worth watching.

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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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Carmike Cinemas Inc. (NDAQ:CKEC) revealed today that Watershed Asset Management had increased its stake in the company to 6.7% and nominated one of its own to the company's Board of Directors. Watershed has had an investment-only interest in the company for a long time. Back in October 2005, the fund made several recommendations to the Board in a letter attached to a 13D/A filing with the SEC:

1. Eliminate growth capital expenditures
2. Seek amendments to your bank documents and bond indentures to increase restricted payments flexibility
3. Buy back stock with excess cash; if consent from bondholders can not be secured, buy back bonds at a discount
4. Increase your dividend
5. Begin evaluating options to extract value from your real estate portfolio
6. Communicate your new free cash flow strategy

The fund summarized:

"In summary, we believe that,despite the troubles that Carmike has experienced over the last three quarters, the  compan has a number of practicalmopportunities to improve its return to investors. Moreover, with a rebound in box office performance to 2003 or 2004 levels, Carmike's EBITDA, adjusted for the GKC acquisition, could be $115 million or more. Free cash flow available for shareholders could exceed $60 million. With discipline on capital expenses and a commitment to deploy cash with a view to enhancing shareholder value, Carmike's shares would trade dramatically higher."

Since then, the stock has dropped further from a high of $35 to its current levels of $17 per share. Watershed is likely attempting to remedy the situation by electing its own member to the Board in an effort to further influence these changes within the company. In an 8K filing with the SEC yesterday, the Board announced that its current Director - James J. Gaffney - would not be running for re-election, and the company would recommend Watershed's Kevin D. Katari to shareholders. This Board spot will enable Watershed to help the company execute its plan to enhance shareholder value, and ultimately increase the stock price. This makes CKEC a stock definitely worth watching during the next few months.

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The Rowe Companies (AMEX:ROW) announced today that it would commence voluntary proceedings under Chapter 11 in an attempt to restructure the company and return it to profitability. The company has been beaten up from its highs of nearly $6 in 2005 to its current price of just $0.43. The company announced that it plans to sell off its retail division - Storehouse, Inc. - so it can focus on its core manufacturing operations. Meanwhile, Rowe intends to continue with business as usual with not even a payroll modification.

So, why is this company worth noting? Well it turns out that bankruptcies can provide investors with great opportunities to profit. The key is not in buying stock now, but rather after the company emerges from bankruptcy. Often times these companies will issue new shares to creditors, which the creditors have no interest in keeping. Therefore, there is almost always a sell off that floods the market with cheap shares. It is also important to look at the "new" company's financials once (and if) they emerge from bankruptcy. Rowe will likely report pro-forma earnings that will show whether the company is performing poorly overall due to bad management, or whether the retail segment was responsible. If it was only the retail segment causing trouble, and the company has sold it off, Rowe could be an attractive investment long-term.

Not all companies perform great after emerging from bankruptcy, but a combination of creditor selling pressure and a sale of any poorly performing segments tilts the odds in investors' favor. This stock is definitely one to watch as this situation unfolds...

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Napster Inc. (NDAQ:NAPS) announced yesterday that it was hiring UBS AG to assist the Board of Directors in reviewing strategic alternatives, which could include a sale of the company. The company noted that this decision came as a result of unnamed third parties that expressed interest in a possible business combination or acquisition. In the press release, the CEO noted:

"Our goal is to enhance shareholder value which could potentially lead to a new strategic partnership or the sale of the company but in any event our primary focus will remain on growing Napster."

The CFO also highlighted the company's strong financial position:

"Napster has a strong balance sheet with a healthy cash position of $97 million as of the close of the first quarter and we are currently generating annual revenues in excess of $100 million."

While the company certainly is not cheap by traditional measures, it does have some things going for it. With the new flurry of new products and deals in the music industry, many were expecting this kind of consolidation. The online music market is only going to grow, and Napster has a strong brand name and a large customer base. The stock is currently up over 15% on the news. As of now, we can only speculate on a buyout price; however, any future announcements will come in the form of a press release or 8K filing with the SEC - this stock is definitely one to keep an eye on!

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Cost Plus, Inc. (NDAQ:CPWM) - more commonly known by its brand name "World Market" revealed today in a 13D filing that Red Mountain Capital Partners LLC had taken a 6.2% stake in the company.

In the filing, they noted:

"Red Mountain acquired the Common Stock reported in this Schedule 13D for investment purposes because