market folly

Clint Carlson's hedge fund firm Carlson Capital filed a 13D with the SEC signifying their activist investment in Ruby Tuesday (RT). Due to trading on June 7th, 2011, Carlson has disclosed a 5% ownership stake in RT with 3,250,000 shares.

This marks over a 10,800% increase in their position size (they only owned 29,800 shares at the end of the first quarter). Carlson's stake in total was purchased with $33.6 million.

Activist Investment

The 13D filing was made in conjunction with Becker Drapkin Management and for activist purposes the two have filed as a "group." Collectively, the group owns 4,143,900 shares of Ruby Tuesday (including 200,000 shares of underlying call options exercisable until October 22nd, 2011). In total, this represents 6.4% of outstanding shares.

While they originally purchased shares because they believed they were undervalued, the "purpose of transaction" section of the regulatory filing outlines that Becker Drapkin is seeking to nominate directors at the company's annual meeting.

Connection With Becker Drapkin Again

The interesting thing here is that this is not the first time that Carlson Capital and Becker Drapkin have filed together. In the past, we covered when the two managers got involved with Hot Topic (HOTT).

That situation seemed to work out well, as shares of HOTT are up over 31% since then and Carlson still held its entire position as of the end of the first quarter. We'll have to see if these two firms can work their magic again.

Per Google Finance, Ruby Tuesday "including its wholly owned subsidiaries (RTI) owns and operates Ruby Tuesday casual dining restaurants."