Factory Card & Party Outlet (FCPO) Holder Midwood Capital Seeks Increased Shareholder Representation on the Board

In an amended 13D filing after the close Thursday on Factory Card & Party Outlet Corp. (Nasdaq: FCPO), 7.8% holder Midwood Capital disclosed a letter to the company suggesting to the Board of Directors that the company would benefit from increased shareholder representation on the Board.

The firm has a cost basis of about $8 per share for its position. Today the stock is at $12.50.

The firm said, "We recently made a proposal seeking greater shareholder representation on the board. All but one current director has been a member of the board since 2002 meaning that they were placed in this position not by the company's owners but effectively by its creditors. While the incumbent directors have retained their seats since 2002, we see this less as an affirmation of their performance than the systemic obstacles to the nomination of director candidates by shareholders. This incumbent advantage is particularly acute in the case of Factory Card whose bylaws present significant obstacles to shareholders who seek to elect new directors."

A Copy of the Letter:

Gentlemen:

For more than a year, we have had formal and informal communication with members of the board with two simple objectives in mind: 1) to encourage the board to take steps to maximize value for all shareholders and 2) to improve elements of the company's governance regime. While the company's hiring of Goldsmith Agio Helms to assist in the evaluation of strategic alternatives is consistent with the former objective, we do not understand why the board has been so reluctant to engage with us regarding the latter objective.

We recently made a proposal seeking greater shareholder representation on the board. All but one current director has been a member of the board since2002 meaning that they were placed in this position not by the company's owners but effectively by its creditors. While the incumbent directors have retained their seats since 2002, we see this less as an affirmation of their performance than the systemic obstacles to the nomination of director candidates by shareholders. This incumbent advantage is particularly acute in the case of Factory Card whose bylaws present significant obstacles to shareholders who seek to elect new directors.

We believe that our proposal would have served to validate the strategic alternatives process and defuse the conflict that has developed between shareholders and the board. Moreover, it would have avoided a future fight for control of the board in the event the company is not sold. If such a contest were to occur, we are certain that the incumbent board would be replaced. We hope the company does get sold so it can avoid going down such a path.

Sincerely,
David Cohen
Managing Director
Midwood Capital Management LLC

Midwood Capital Boosts Edgar Online (EDGR) Stake to 7%

In an amended 13D filing on Edgar Online, Inc. (Nasdaq: EDGR), Midwood Capital Management disclosed a 7% stake (1.8 million shares) in the company. This is up from the 5.5% stake (1.38 million shares) the firm disclosed in a January 2006 13D filing.

From the the 'Purpose of Transaction' section of the filing: The Reporting Persons have in the past and may in the future wish to engage in a constructive dialogue with management of the Issuer, as well as with non-employee Directors and other stockholders of the Issuer, regarding new strategies to create and maximize value for the Issuer’s stockholders, which may include a sale of the Issuer.

DG FastChannel (DGIT) Confirms 11.4% Point.360 (PTSX) Stake, Notes Past Nondisclosure Agreement

UPDATE: In a 13D filing before the close on Point.360 (Nasdaq: PTSX), DG FastChannel (Nasdaq: DGIT) confirmed they acquired an 11.4% stake (1.1 million shares) in the company. The stake was noted earlier in a filing from Midwood Capital, which sold the PTSX stake to DGIT. The shares were purchased at $3.25 in a transaction dated 12/22.

In a pretty standard disclosure, DG FastChannel said it may in the future seek the views of, hold active discussions with and respond to inquiries from members of the board of directors, officers or representatives of the Company and other persons regarding the Company’s affairs and strategic alternatives, and the interests of other stockholders in participating in such alternatives.

DG FastChannel also noted in the filing that they entered into a Nondisclosure Agreement with the Company on August 16, 2006 for purposes of evaluating a possible business relationship.

Shares of Point.360 finished 49% higher today on the news.

Point.360 (PTSX) Surges After DG FastChannel (DGIT) Buys 1.1M Shares

Point.360 (Nasdaq: PTSX) is soaring higher this morning following a 13D disclosure after the close Wednesday that large holder Midwood Capital sold its entire 1,108,674 shares to DG FastChannel (Nasdaq: DGIT) on 12/22 for $3.25 in a privately negotiated transaction. The shares represent over 11% of Point.360. Shares of Point.360 closed at $2.40 per share the day of the transaction. The stock is current at $3.24, up 37% on the session.

Factory Card & Party's (FCPO) Strategic Alternatives Review News is a Win for Midwood Capital

Factory Card & Party Outlet's (NASDAQ: FCPO) news today that it initiated an external process to explore strategic alternatives is a win for 9.7% holder Midwood Capital Management. The hedge fund has been pushing the company to hire an investment banker to explore a sale since August. Link1, Link 2

Based on calculations, Midwood Capital paid an average of $7.92 for each share its owns. Today FCPO is trading at $8.45.