Phil Goldstein on Activist Investing

This video is taken from the Deal's M&A Outlook 2009 conference where Phillip Goldstein, a principal at the activist hedge fund Bulldog Investors, recently spoke about corporate boards and activist investors. If you are having trouble viewing the video below, click here.

Real Time Activist Investment Updates on RealMoney.com

Damien Park, The CEO of Hedge Fund Solutions - the administrator for this blog, is providing current market commentary on activist investments for RealMoney.com.

Park, who will focus exclusively on activist investments, will join 45 of Wall Street's best investment professionals that provide RealMoney subscribers with a running commentary on actionable investment ideas throughout each trading day.

RealMoney, the paid subscription service for TheStreet.com, provides insights, analysis and detailed investment recommendations from top investment professionals, all in real time.

10 Reasons Why 2009 Will Bring More Activism

Eric Jackson (one of our Activist Blog & Tacklers) recently wrote an article for TheStreet.com titled "Why 2009 Will Bring More Activism". Here are the 10 reasons he gives. Read the whole article on TheStreet.com or go to Eric's blog.

1. Obama will look favorably on pro-shareholder measures.
2. The new SEC chair will sponsor several new shareholder-friendly measures.
3. Valuations are on the floor.
4. A flight to quality in hedge funds will benefit activist investors.
5. Management and corporate boards will not want to be viewed as anti-shareholder.
6. There will be a wave of industry consolidation.
7. Activists have the longest lock-up periods of any hedge fund class, so they can put fresh capital to work.
8. Limits on short-selling will benefit activists.
9. Activists will become more blanaced on the long and short sides.
10. There's more to get "active" about than ever.

Shareholder Activism Insight

Marc Weingarten and David Rosewater from Schulte Roth & Zabel, a couple of the better legal minds working with activist investors (and some companies too), recently issued an interesting report titled “Shareholder Activism Insight”. Click here to get the full report.

The report highlights current trends in activist investing and provides an outlook for activist investing in the year ahead.

SRZ commissioned mergermarket to interview 25 senior corporate executives and 25 activist investors regarding their thoughts. Here are a few highlights:

• 56% of overall respondents expect to see an increase in shareholder activism over the next 12 months.
• 48% of corporate respondents view activist shareholders as short-term market opportunists.
• 48% of activists believe corporate boards are passive rather than proactive when it comes to maximizing shareholder value.
• 48% of activists were passive investors for a year or more before turning active.
• 67% of corporate respondents believe the best defensive strategy a company can use against activism is maintaining an active dialogue with its shareholders.

Posted by Damien Park, Hedge Fund Solutions

November's Activist Investments - 75+ Companies Targeted

Below is a summary list of investments made by shareholder activists during November. This information was extracted from Hedge Fund Solutions' Catalyst Equity Research Report(TM), a free in-depth weekly research report on activist investments.

To receive the FREE report subscribe here.

Ticker	Company	Activist Investor
ABTL	Autobytel Inc	Trilogy Inc
ACF	AmeriCredit Corp	Fairholme Capital Management
ACTL	Actel Corp	Ramius Capital
ADPT	Adaptec, Inc	Steel Partners
ARCW	Arc Wireless Solutions	Brean Murray Carret Group
ATSG	Air Transport Services Group	Perella Weinberg Partners
AVGN	Avigen Inc	Biotechnology Value Fund
BBI	Blockbuster Inc	Marlin Sams Fund
BEE	Strategic Hotels & Resorts	Security Capital Research & Management
BITI	Bio-Imaging Technologies	Healthinvest Partners
CHG	CH Energy Group Inc	Gamco Investors
CHIC	Charlotte Russe Holding Inc	KarpReilly Capital Management
CPN	Calpine Corp	Harbinger Capital
CRXX	CombinatoRX, Incorporated	Biotechnology Value Fund
CTO	Consolidated Tomoka Land Co	Wintergreen Advisers
CWLZ	Cowlitz Bancorporation	Crescent Capital
DBD	Diebold Inc	Gamco Investors
DCAP	DCAP Group	Infinity Capital Partners
DVD	Dover Motorsports	Mario Cibelli
ENTU	Entrust Inc.	Empire Capital Partners
FACE	Physicians Formula Holdings, Inc	Mill Road Capital
FSCI	Fisher Communications	Gamco Investors
FTAR.OB	Footstar Inc	Schultze Asset Management
GBE	Grubb & Ellis Company	Anthony Thompson
GGP	General Growth Properties	Pershing Square Capital
GSLA	GS Financial Corp	FJ Capital Long/Short Equity Fund
HCBK	Hudson City Bancorp	Gamco Investors
HFFC	HF Financial Corp	PL Capital
INFS	Infocus Corp	Nery Capital Partners
INFS	Infocus Corp	Lloyd Miller
ISH	International Shipholding Corp	Liberty Shipping Group
KANA.OB	Kana Software	KVO Capital Management
KEYN	Keynote Systems	Ramius Capital
KFS	Kingsway Financial Services	Joseph Stilwell
KONA	Kona Grill	Mill Road Capital
LCAV	LCA-Vision Inc	Stephen Joffe
LDIS	Leadis Technology Inc	Kettle Hill Capital Management
LNET	LodgeNet Interactive Corporation	Mark Cuban
LTM	Life Time Fitness	Green Equity Investors
MCGC	MCG Capital Corporation	Springbok Capital Management
MGAM	Multimedia Games Inc.	Dolphin Limited Partnership
MGI	Moneygram Interntaional Inc	Blum Capital
MIM	MI Developments	Greenlight Capital
MYE	Myers Industries Inc	Gamco Investors
NAV	Navistar International	Owl Creek
NLS	Nautilus Inc	Sherborne Investors
NOOF	New Frontier Media	Steel Partners
NYT	New York Times	Harbinger Capital
OEH	Orient-Express Hotels	SAC Capital; DE Shaw
ORNG	Orange 21	Costa Brava
PBIP	Prudential Bancorp Inc. of PA	Joseph Stilwell
PGRI.OB	Platinum Energy Resources Inc	Syd Ghermezian
PHH	PHH Corp.	Pennant Capital Management
PNNW	Pennichuck Corp	Gamco Investors
PPCO	Penwest Pharmaceuticals Co	Perceptive Advisors
PRXI	Premier Exhibitions, Inc	Sellers Capital
PWER	Power One	Bel Fuse
PXG	Phoenix Footwear Group	Reidman Corp
RDEN	Elizabeth Arden	Shamrock Activist Value Fund
SCOP	Scopus Video Networks Ltd.	Optibase Ltd
SECX.PK	SED International Holdings	Hummingbird Management
SLTC	Selectica Inc	Trilogy Inc (Versata Enterprises)
SNG	Canadian Superior Energy	Palo Alto Investors
SNSTA	Sonesta International Hotels	Gamco
SUAI	Specialty Underwriters Alliance	Philip Stephenson
SUMT	SumTotal Systems	Discovery Capital
SUTM.OB	Sun-Times Media Group Inc.	K Capital
SUTM.OB	Sun-Times Media Group Inc.	Davidson Kempner Partners
SWWI	Simon Worldwide Inc	Everst Special Situations Fund
TIKRF.OB	Tikcro Technologies Ltd	Steven Bronson
TXCC	TranSwitch Corp	Brener International Group
TXI	Texas Industries	Shamrock Activist Value Fund
UIS	Unisys Corp	MMI Investments
UTEK	Ultratech Inc	Temujin Fund
WBSN	Websense Inc	Shamrock Activist Value Fund
WEDC	White Electronic Designs	Wynnefield Capital
WINS	SM&A	Mill Road Capital
YHOO	Yahoo	Carl Icahn
ZLC	Zale Corp.	Breeden Capital Management

Pershing Square will host a webcast to discuss Target

Pershing Square Capital will host a teleconference and webcast on Wednesday November 19th at 11am EST during which it will present a revised potential transaction for Target Corporation. The revised transaction addresses each of the concerns raised by the Company in response to Pershing Square's October 29th presentation, and incorporates feedback from shareholders, bondholders, and other market participants.

A live audio broadcast of the presentation will also be available by teleconference. The call can be accessed in the United States by dialing 1-888-674-0219 (internationally by dialing 201-604-0489), with the participant access code of "Pershing Square".

Written materials describing the potential transaction will be made available at www.visualwebcaster.com/pstgt following the presentation.

October's Activist Investments - 76 Companies Targeted

Below is a summary list of investments made by shareholder activists during the month of October. This information was extracted from Hedge Fund Solutions' Catalyst Equity Research Report(TM) - a free in-depth weekly research report on activist investments.

To receive the FREE report delivered via email weekly subscribe at http://www.hedgerelations.com/research.html

For additional information on any specific transaction contact Damien Park at 215.325.0514 or dpark@hedgerelations.com

Ticker	Company	Activist Investor
ACTL	Actel Corp	Ramius Capital
AGYS	Agilysys Inc	Ramius Capital
AIG	American International Group	Maurice Greenberg
ALMI.PK	Atlas Mining Co	IBS Capital
ASHW	Ashworth, Inc	Knightspoint
AVGN	Avigen Inc	Biotechnology Value Fund
BBI	Blockbuster Inc	Marlin Sams Fund
BGP	Borders Group	Pershing Square Capital
BRKS	Brooks Automation	Nierenberg Investment Management
BWY	BWAY Holding Company	ValueAct Small Cap
CFW	Cano Petroleum	Carlson Capital
CIM	Chimera Investment Corp	VA Partners
CPWM	Cost Plus Inc	Stephens Investments Holdings
CRC	Chromcraft Revington	Aldebaran Capital
CSCD	Cascade Microtech	RGM Capital
CTZN	Citizens First Bancorp	Financial Edge Fund
CVG	Convergys Corp	Jana Partners
DANKY.OB	Danka Business Systems	DCML LLC
DBD	Diebold Inc	Gamco
DEK	Dekania Corp	Bulldog Investors
DPZ	Dominos	East Peak Partners
ELGX	Endologix Inc	Elliott Associates
EMAG	Emageon	Oliver Press Partners
ENZN	Enzon Pharmaceuticals	DellaCamera Capital Management
EPIC	Epicor Software Corp	Elliott Associates
ESIO	Electro Scientific Industries	Nierenberg Investment Management
ETWC	Etrials Worldwide	Clark Financial Group
F	Ford Motor	Tracinda
GBE	Grubb & Ellis Company	Anthony Thompson
GFF	Griffon Corp	Barington Capital
GFY	Westeren Asset Variable Rate Strategic Fund	Bulldog Investors
GSL	Global Ship Lease	Steel Partners
GYRO	Gyrodyne	Bulldog
ISH	International Shipholding Corporation	Liberty Shipping Group
JAVA	Sun Microsystems	Southeastern Asset Management
LDG	Longs Drug Stores	Advisory Research
LDG	Longs Drug Stores	Pershing Square
LDIS	Leadis Technology Inc	Kettle Hill Capital Management
LEAP	Leap Wireless	Harbinger Capital
LGF	Lions Gate Entertainment Corp	Carl Icahn
LNG	Cheniere Energy	Paulson & Co
LQMT.OB	Liquidmetal Technologies	Wynnefield Capital
LRT	LL&E Royalty Trust	Robert Robotti
MCF	Contango Oil & Gas Co	Sellers Capital
MDZ	MDS Inc	Obrem Capital Management
MGAM	Multimedia Games Inc	Dolphin Limited Partnership
MIM	MI Developments	Farallon Capital Partners
NLCI	Nobel Learning Communities	Wynnefield Capital
NMSS	NMS Communications Corp	Lloyd Miller
OEH	Orient Express Hotels	D.E. Shaw & Co; SAC Capital
PPM	Investment Grade Municipal Income Fund	Western Investment
PVH	Phillips Van Heusen Corp	Blue Harbour Group
PWER	Power One Inc	Bel Fuse Inc
QLTI	QLT Inc.	West Coast Asset Management
RDEN	Elizabeth Arden	Shamrock Activist Value Fund
RHIE	RHI Entertainment	Baupost Group
RUBO	Rubios Restaurant	Kelly Capital
S	Sprint Nextel Corp.	Relational Investors
SNG	Canadian Superior Energy	Steelhead Partners
SUTM.OB	Sun-Times Media	Davidson Kempner Capital
TBAC	Tandy Brands Accessories	NSL Capital Management
TCX	Tucows Inc	Fertilemind Management
TEAM	TechTeam Global	Emancipation Capital
TGT	Target	Pershing Square
TIER	Tier Technologies	Discovery Capital Group
TLGD	Tollgrade Communications	Ramius Capital
TRI	Thomson Reuters	ValueAct Capital
TRIB	Trinity Biotech	Thomas Reidy
TXI	Texas Industries Inc.	NNS Holdings
UAHC	United American Healthcare Corp	Lloyd Miller
UBET	YouBet.com	New World Opportunity Partners
UIS	Unisys Corp	Steel Partners
URI	United Rentals Inc	Faireholme Capital Management
VVTV	ValueVision Media Inc.	Carlo Cannell
WEDC	White Electronic Designs	Wynnefield Capital
WINS	SM&A	Millroad Capital

Posted by Damien Park, Hedge Fund Solutions

Pershing Square Capital Management Announces Public Presentation on Target Corporation on Wednesday, October 29, 2008

Pershing Square Capital Management, L.P. announced today that it will host a public presentation on Wednesday, October 29, 2008 where it will detail a potential transaction that Pershing Square believes will build long-term value for Target Corporation and all of its stakeholders. All parties are welcome to attend the presentation, which will be of particular interest to investors and analysts focused on retail, real estate, fixed income and credit.

Pershing Square is a long-term investor in Target. Since acquiring its initial stake in April 2007, Pershing Square has beneficially acquired slightly less than 10% of the company's outstanding common stock.

Target's thoughtful and constructive approach with shareholders has been instrumental to Pershing Square's work in developing a potential transaction. Pershing Square believes that the insights gained by sharing the potential transaction in a public forum will benefit Target and all of its stakeholders.

The presentation will be based solely on publicly available information, as well as assumptions, estimates and projections of Pershing Square.

Due to limited available seating, attendees are encouraged to register in advance at www.visualwebcaster.com/pstgt, but may also do so at the event beginning at 12:30 PM.

Date: Wednesday, October 29, 2008
Time: Registration: 12:30 PM Presentation: 1:30 PM
Place: The AXA Equitable Auditorium
787 Seventh Avenue (between 51st and 52nd Streets)
New York, NY 10019

A live webcast of the presentation will be available at www.visualwebcaster.com/pstgt.

A live audio broadcast of the presentation will be available by teleconference. The teleconference can be accessed in the United States by dialing 1-866-682-9100 (internationally by dialing 201-499-0417), with the participant access code of 2629412.

Written materials describing the potential transaction will be made available at www.visualwebcaster.com/pstgt following the presentation.

Activist Spotlight: Wynnefield Small Cap Value Fund

This post was contributed by Ted Wallace, an analyst with the proxy solicitation firm The Altman Group. We're pleased to have Ted contribute to our blog and look forward to additional posts from him in the future.

Will the current market conditions lead to an increase in hedge fund activism? Wynnefield Partners Small Cap Value LP is one firm that has recently increased its communications with management teams as a means of protecting its investments. Below are the four situations in which Wynnefield has chosen to take a pro-active stance with management in recent months. In three of these, Wynnefield converted a 13G (5% or greater, passive investment) filing to a 13D filing (5% or greater, may seek to influence management).

Four activist situations for a single fund at one time, while not unusual, is rare. Four activist situations in three months on the part of Wynnefield Partners Small Cap Value LP is unheard of.

Nobel Learning Communities, Inc. (NLCI)
Wynnefield converted its 12.5% interest from a 13G filing to a 13D in July with the intent of persuading NLCI to enact a poison pill with a 30% trigger. Since then, Wynnefield has amended this 13D in September and October with letters to the Board, urging it to consider the acquisition offer made by Knowledge Learning Corp.

NLCI has a $130.29M market cap and is 19% institutionally held. It represents 7.4% of Wynnefield’s portfolio. Wynnefield holds 12.8% of NLCI as of its October 23rd 13D/A.
NLCI Filings

Liquidmetal Technologies, Inc. (LQMT)
Wynnefield converted its 8.34% interest from a 13G filing to a 13D in August, stating that LQMT had defaulted on its Subordinated Convertible Notes by not amortizing them ab initio. Wynnefield also stated its intent to seek a more active role in the company, “in order to protect their position and the position of other shareholders and creditors.”

Since then, Wynnefield has formally rejected LQMT’s settlement terms with respect to the Notes, and in October sent a letter to the company demanding the formation of a special committee of independent board members to evaluate the capital situation of LQMT. In the letter, Wynnefield also demanded that one of its nominees be appointed to LQMT’s board.

LQMT has a $4.92M market cap and is 2% institutionally held. It represents 0.07% of Wynnefield’s portfolio. Wynnefield holds 8.34% of LQMT as of its October 10th 13D/A (this includes the Convertible Notes and Warrants).
LQMT Filings

White Electronic Designs Corp. (WEDC)
Wynnefield converted its 5.7% interest from a 13G filing to a 13D in September, when it sent a letter to WEDC’s board in support of the request of Brian Kahn(of Kahn Capital Management LLC) to be appointed to the seat left vacant by Hamid R. Shokrgozar’s recent resignation.

Since then, Wynnefield has filed three amendments to its 13D, continuing its support of Kahn’s appointment and demanding that WEDC keep its shareholders informed of the findings of the Strategic Committee. Wynnefield has also urged the company not to waste time and money in a search for a new CEO until the Strategic Committee’s recommendations have been publicly presented.

WEDC has a $83.33M market cap and is 45% institutionally held. It represents 1.88% of Wynnefield’s portfolio. Wynnefield holds 5.8% of WEDC as of its October 20th 13D/A.
WEDC Filings

Unigene Laboratories, Inc. (UGNE)
Wynnefield amended its January 13D filing (5.4%) in September, with a letter stating its intent “to influence the Issuer’s Board and its management to take certain actions designed to enhance shareholder value.” The letter set forth a grievance list and a demand that UGNE reduce the size of the board from 9 members to 7, including 2 of Wynnefield’s nominees.

UGNE has a $55.17M market cap and is 2% institutionally held. It represents 1.49% of Wynnefield’s portfolio. Wynnefield holds 5.4% of UGNE as of its September 4th 13D/A.
UGNE Filings

Past Activism
Wynnefield and Breeze-Eastern Corp. (BZC) settled for board seats in July 2008.

Wynnefield and Crown Crafts, Inc. (CRWS) settled for board seats in June of 2008.

After pressure from Wynnefield, H. Thomas Winn resigned from the position of Chairman of the Board of Nevada Gold & Casinos, Inc. (UWN) in June of 2007 (he did not resign from the Board itself). This was also a situation in which Wynnefield converted from a 13G to a 13D; Wynnefield still holds 13% of the company.

From the Wynnefield Website:

“Wynnefield maintains a pro-active posture with respect to its portfolio names when it believes management is not taking appropriate measures to surface shareholder value, where corporate governance issues exist, or where outside assistance can be provided to a management working to implement value creating strategies. In numerous cases, we are Schedule 13-D and Form 4 filers. Wynnefield does not generally seek out Board representation. However, one of our members will, in rare circumstances where the size of the position and potential return warrants a higher level of resource commitment, accept a board of director's seat. We are not litigious and do not accept greenmail, operating only for the entire class of holders of which we are part”

Conclusion
In a very broad sense, activist hedge funds can be placed into two categories: corporate-raider and management-friendly. The former seeks a return on the fund investment by being the catalyst for a situation that drives stock prices up (and then getting out of the stock). The latter seeks to increase the value of its investment from the inside-out – by working with management to increase the productivity of a company or get the best price for shareholders if a sale of the company is warranted. Categorizing such situations is tricky: the categories themselves are fungible and it is possible for a fund to start out as one and become the other. At bottom, these descriptions end up being more indicative of situational strategies than of the funds themselves. They are the good cop/bad cop masks the funds wear to achieve the desired reaction from management.

Which type of investor in each of the above situations is Wynnefield Partners Small Cap Value LP?

Wynnefield’s general modus operandi has been to convert its 13G filing to a 13D – to switch from a passive investor to an active one. Wynnefield’s investments in the above four companies range from 0.7% to 7.4% of its portfolio – there are 34 companies within this range that have not received this level of communication from Wynnefield. It has a total of 61 stocks in its portfolio.

Under the current market conditions, can we expect more hedge fund activism, and if so, which type of activist strategy is more likely to succeed?

In the future, I think we can expect an increase in hedge fund activism from both categories. Many, many companies reached a 52-week low in the past couple of months, and nothing justifies pointing the finger at management as well as low stock prices. I think we will see plenty of action from the corporate raider types – demanding board representation and overhaul, calling for companies to be sold, etc. I think we will also see plenty of activism from investors who see value in a company and will roll up their sleeves and get in the trenches to help management get through these tough times.

All aggregate equity interest data from FactSet or Yahoo! Finance.

This entry was posted by Ted Wallace from The Altman Group.

The Activist Entrepreneur: Varieties of Nationalization

This is part two in a series of posts chronicling the activist investing efforts of Hank Greenberg at AIG. This blog entry is written by Chris Faille, a writer (formerly with Reuters’ HedgeWorld) and regular contributing expert to our blog. Chris’ blog on the struggles for corporate control can be found at: http://www.proxypartisans.blogspot.com/

The Federal Reserve last month offered AIG a loan of $85 billion. As I noted in the first part of this series, there were significant strings attached. AIG agreed to pay 8.5% over three-month LIBOR, an initial gross commitment fee of 2% of the total loan facility, and an 8.5% fee on undrawn amounts. Also – the kicker – the Fed received a 79.9% stake in the insurer.

The same authorities raised the stakes on October 8, offering a separate line of credit of up to $37.8 billion. This gave AIG a cushion of close to $123 billion. In the punchline of an old joke, “…pretty soon you’re talking about real money.”

Yet the insurer is working through that cash at a steady clip, meeting collateral calls and unwinding its positions on derivatives tied to bad mortgage debts. Even more worrisome, it hasn’t yet managed to arrange any of the asset sales on which its survival certainly depends.

Meanwhile, it has provided the usual diverting let-them-eat-cake story: that now-infamous $440,000 post-rescue weekend at a California spa for (according to the initial reports) certain of its executives. AIG denied one aspect of this report: it has said that the event was for independent agents that bring in a lot of business, not for headquarters execs. Nonetheless, the late night comics had their fodder.

In the midst of the mess, Maurice (“Hank”) Greenberg has put forward his own plan to save the giant insurance company he led for more than four decades. He calls the Fed loan, its terms, and the anticipated asset sales all a “lose/lose plan.” He proposes that the deal be re-negotiated, and that the Fed receive instead non-voting preferred stock with a dividend of about 5.5% and a 10 year right of redemption. (link to Greenberg's letter)

Nationalization by Foreigners
Nationalization looks rather different when it comes from your own government. The partial takeover of AIG that we have seen over the last month reminds me, though, of some observations in a recent book about AIG, and Greenberg’s large place in its history. The book, written by Ron Shelp, a former AIG troubleshooter, with assistance from journalist Al Ehrbar, is fittingly titled Fallen Giant (2006).

It devotes considerable attention to the issue of nationalization, attention that carries an ironic charge now.

When other U.S. companies suffered from nationalization policies in non-U.S. countries, they’ve generally lost the value of the tangible assets in the companies concerned – in Cuba or India, to take just two instances. A U.S. company that lost the value of a nationalized steel plant or automobile assembly line in such a place was assured of the sympathy, and perhaps of the effective assistance, of the U.S. State Department. AIG executives have often had reason to be envious of that.

AIG’s business (as Cornelius Starr himself put it after Castro took over in Cuba) isn’t anything as tangible as a steel plant. It’s “a guarantee, a piece of paper.” Valuing that piece of paper, and determining the compensation appropriate after nationalization, is a tricky matter.

It wasn’t until the 1970s that a considerable lobbying push developed to have the government recognize services, including insurance products, as items of trade on a par with tangible goods. When such a movement did develop, AIG played a big part in it, and Hank Greenberg chaired the trade association that resulted, the Coalition of Service Industries.

This push for parity of treatment for intangibles got underway too late, though, to have an impact on the wording of The Trade Act of 1974. One crucial provision of that law, section 301, gave the executive branch the authority to retaliate against a foreign country that discriminates against U.S. commerce. The discrimination, of course, need not go as far as Castroite nationalization to invoke 301, although that’s a paradigm case.

By 1984 the CSI had made its point, and the law was amended that year to include service industries within the scope of 301.

Shelp and Ehrbar write, “AIG’s worldwide reputation had been substantially enhanced by the very visible leadership it had given to advancing this issue.”

Nationalization at Home
Greenberg, in recent testimony prepared for the House Committee on Oversight, also spoke of this issue. “During my tenure there, AIG opened markets for U.S. businesses all over the world, and contributed significantly to U.S. gross domestic product. For more than three decades, it stood at the vanguard of the movement to liberalize the global trade in services.”

Now that the threat of nationalization has arisen from within the U.S. political system, with some assistance from the state of New York and more assistance from the political tone-deafness of AIG’s leadership, neither the State Department nor the trade officials in the Commerce Department will do it any good.

Furthermore, and unfortunately, Greenberg’s alternative plan is a non-starter. The Fed isn’t obliged to respond to an SEC filing, and of course aren’t likely to “surrender their bond” (if the Shakespearean phrase be allowed) in return for anything less than they were able to exact at the moment of crisis.

But Greenberg has left us that testimony to the House Oversight Committee, and in that he has given us the best account yet of what happened, of how “the risk controls my team and I put in place were weakened or eliminated after my retirement.”

That subject will occupy us in the next installment of this series.

This entry was posted by Chris Faille who is a journalist covering activist investing issues and a regular contributor to our blog.

September's Activist Investments - 57 in total.

Below is a summary list of investments made by shareholder activists during the month of September. This information was extracted from Hedge Fund Solutions' Catalyst Equity Research Report(TM) - a free in-depth weekly research report on activist investments.

To receive the FREE report delivered via email weekly, subscribe at http://www.hedgerelations.com/research.html

For additional information on any specific transaction below, contact Damien Park at 215.325.0514 or dpark@hedgerelations.com

Ticker	Company	Activist Investor
ALDN	Aladdin Knowledge Systems	Vector Capital
ALEX	Alexander & Baldwin	Breeden Capital Management
ALO	Alpharma Inc	Gamco
AMLN	Amylin Pharmaceutical Inc.	Carl Icahn
ANPI	Angiotech Pharmaceuticals	West Coast Asset Management
ARBX	Arbinet-TheExchange	Karen Singer
AVPI	AVP Inc.	RJSM Partners
BAMM	Books-A-Million, Inc	Discovery Group
BBAL.OB	New York Health Care	David Polonitza
BKFG.PK	BKF Capital	Catalyst Fund
CPN	Calpine Corp	Luminus Management
CSK	Chesapeake Corp	Edelmann GmbH & Co
CSX	CSX Corp	The Children's Investment Fund
CVG	Convergys Corp	Jana Partners
DDS	Dillards Inc	Clinton Group/Barington Capital
DEK	Dekania Corp	Bulldog Investors
DIN	DineEquity, Inc	MSD Capital
DVD	Dover Motorsports	Mario Cibelli
EII	Energy Infrastructure Acquisition Corp	Bulldog Investors
ESCA	Escalade Inc	VN Capital Fund
GLA	Clark Holdings	Cherokee Capital Management
GSIT	GSI Technology	Riley Investmetn Management
HDLM	Handleman Co	S. Muoio & Co
HI	Hillenbrand Inc	Breeden Capital
IPAS	iPass, Inc	Foxhill Capital
IRF	International Rectifier	Vishay Intertechnology
ISH	International Shipholding Corp	Liberty Shipping Group
ISV	Insite Vision Inc	Pinto Technology Ventures
LDG	Longs Drug Stores Corp	CtW Investment Group
LDG	Longs Drug Stores Corp	Pershing Square/Advisory Research
LENS	Concord Camera	Everest Special Situations Fund
LQMT.OB	Liquidmetal Technologies, Inc	Wynnefield Capital
MPET	Magellan Petroleum Corp	ANS Investments
MWRK	Mothers Work	Mill Road Capital
MZF	MBIA Capital	Western Investment
NAPS	Napster	Perry Rod
NCOC	National Coal Corp	Centaurus Energy Master Fund
NLCI	Nobel Learning Communities	Blesbok Inc
NTMD	Nitromed Inc	Deerfield Capital
NTN	NTN Buzztime	Trinad Capital; Media General
OEH	Oriental Express Hotels	DE Shaw; SAC Capital
PCYC	Pharmacyclics Inc	Robert Duggan
REMC.OB	Remec, Inc.	Ancora Capital
SLE	Sara Lee Corp	Value Act Partners
SPA	Sparton Corp	Lawndale Capital
SUTM.OB	Sun-Times Media Group	Davidson Kepner Partners
TAC	TransAlta	The Children's Investment Fund
TBAC	Tandy Brands Accessories	NSL Capital
TIER	Tier Technologies	Discovery Equity
TMTA	Transmeta Corp	Riley Investment Management
TMWD	Tumbleweed Communications Corp	Empire Capital
TXI	Texas Industries	NNS Investments
UAHC	United American Healthcare Corp.	Strategic Turnaround Equity Partners
UNGE.OB	Unigene Laboratories Inc	Wynnefield Partners
UTEK	Ultratech Inc	Temujin Fund Management
WEDC	White Electronic Designs Corp	Wynnefield Partners
WMPN.OB	William Penn Bancorp	Joseph Stilwell

Posted By Damien Park, Hedge Fund Solutions

Carl Icahn will launch a lobbying group to promote shareholder friendly legislation

Carl Icahn will launch a lobbying group called United Shareholders with the intention to pass more shareholder-friendly legislation.

Icahn's office told me they intend to officially announce the effort later this week. We'll be sure to post the details when we get them.

In the meantime... a report from MarketWatch suggests that the purpose of the lobbying group is to promote laws that will block large compensation packages for executives at underperforming companies. In addition, the group will press for legislation that will make poison pills and staggered boards illegal.

Posted by Damien Park from Hedge Fund Solutions

The Activist Entrepreneur: Greenberg and the AIG Magnet

This is part one in a series of posts that will continue to follow the activist investing efforts of Hank Greenberg at AIG. This blog is written by Chris Faille, a writer (formerly with Reuters’ HedgeWorld) and regular contributing expert to our blog. Chris’ blog on the struggles for corporate control can be viewed at http://www.proxypartisans.blogspot.com/

Recent news about AIG and about its former chairman, Maurice (Hank) Greenberg, makes an important point about activist investing. Indeed, about entrepreneurship. We might get at this point through an analogy from physics: how is an activist-entrepreneur like, and unlike, an iron filing? On the one hand, an activist moves toward a profit making opportunity as iron filings move toward a magnet. But, on the other, if you put a playing card between the filings and the magnet, the filings will press indefinitely against that card’s surface, going no further. With an entrepreneur, the pursuit can get ingenious and convoluted.

Greenberg, who was at the center of AIG’s growth over a period of decades, has asked for the chance to buy some of its assets. He was unceremoniously ejected from the company in 2005, and has since sought – against obstacles a good deal hardier than playing cards – to find his way back there.

Even if a stone wall is imposed by the fiat of New York State or the United States between the activist-entrepreneur and the opportunity, the former will not remain idiotically pressing his face against the stone, crying “foul”. If he is both agile and determined, he’ll find some more circuitous route, up over the wall or around one of its sides.

The latest news is that Greenberg – who couldn’t be reached for comment on this entry – has objected, in a letter to AIG chief executive Edward Libby, that the process of selling assets has been taking place “without transparency and without providing the opportunity for the participation of alternative purchasers.”

The Wall Street Journal broke this story Wednesday morning, and an AIG spokesman confirmed in a telephone conversation that the company has received the letter as described in the Journal’s report.

The spokesman, Joe Norton, said that he couldn’t comment on the specific contents of the letter, but that the company “welcomes any reasonable expressions of interest in the businesses we plan to sell.”

Some History
AIG is a powerful source of entrepreneurial magnetism for Greenberg. It was the company’s founder, Cornelius Vander Starr, who put Greenberg in charge of its North America holdings in 1962, and named the younger man as his successor six years later. It was only a short time thereafter that the company went public.

Greenberg was still at the top of the corporate hierarchy there in 1999, when AIG put out a press release that described consolidated assets as $259 billion, and shareholders’ equity as $32.3 billion.

Some critics maintain that at or around this time, AIG was paying “contingent commissions,” an illegal way of persuading independent brokers to steer business their way. The critics, including the usual class-action plaintiffs’ lawyers, maintain that the company’s capitalization was inflated because it hid this practice, and consequently its legal liability, from its investors.

The Stone Wall I
In October 2004, the then attorney general for the state of New York, Eliot Spitzer, filed a lawsuit against Marsh & McLennan Companies, a giant insurance brokerage firm, in connection with their solicitation of just such commissions. Maurice Greenberg’s son, Jeffrey Greenberg, was the chairman and CEO of Marsh Mac at the time, a position whence the younger Greenberg resigned soon after the charges were made public.

The elder Greenberg stayed on longer, protesting that the charges were unfounded. The board of directors of AIG pushed him out in March 2005. That May, Spitzer dropped the other shoe, bringing charges against AIG, Greenberg, and the former AIG chief financial officer, Howard I. Smith, alleging fraud and violations of insurance and securities laws.

The AG office hasn’t been able to make any of these charges stick. Spitzer himself dropped some of the charges while he was still AG.

Mr. Greenberg was (understandably) unhappy about his directors’ rather spineless appeasement of Spitzer, and he continued through various entities to control a large chunk of the equity of AIG. In recent months, he had been acting like a man in search of vindication and return.

In November 2005, Greenberg filed a notice with the SEC that he and entities he controlled had decided “there are opportunities to significantly improve the Issuer's [AIG's] performance and strategic direction, as well as the value of their investment." The filing committed Greenberg to nothing, not even to "holding discussions" with other shareholders. Why does one file a document with the SEC that says in effect, “I'm not all that happy with the return I'm getting and I might talk to some others to see if they feel the same way”? People who hold large chunks of stock in a publicly owned company are required to keep the public, and so the management of that company, apprised of their intentions, so there are no takeovers-by-ambush. Despite all the cautious lawyerly wording, then, it appeared to many that Greenberg was setting the stage and some sort of struggle for control was in the offing.

The Stone Wall II
The following month, the Insurance Department of the state of New York stepped up to the plate. New York law says that if an individual stockholder, or a group acting together, acquires more than 10% of the equity of a company selling insurance within that state, the acquirer becomes a "controlling entity" – which means such an acquisition requires state permission.

In December, the department calculated that Greenberg and various affiliated entities constituted a “group” in the relevant sense, and demanded that he “cease and desist from engaging in any further activities aimed at exercising a controlling influence over AIG.”

An attorney for Greenberg, Marcia Alazraki, replied at once, saying that the various entities involved weren't a group in the relevant sense, and asked for a meeting with NY officials to discuss the issue. Ms Alazraki knows the issue well. She was deputy superintendent at the NY Dept. of Insurance herself in the early 1980s, and assistant counsel to the Governor of the state, Hugh Carey, before that (1979-81).

Stone Wall III
But Greenberg persisted, in the belief that he could rescue AIG from what ailed it. In a filing with the SEC on September 16, he said that he had retained an advisory services firm in connection with his investment in AIG and that he was pursuing a variety of options.

Finally, though, the company interposed between itself and its former boss the largest stone wall of all, the United States. It signed a definitive agreement to set up a $85 billion credit line with the Federal Reserve Bank of New York, and to surrender 80% of its equity to the federal government. (As of September 30th AIG has drawn down $61 Billion on the credit facility)

Obviously this implied a devastating degree of value dilution for the shareholders, including Greenberg, who owned roughly 11% of the stock at that point. When he left the company, he held $20 billion worth of its stock. Those holdings are now worth about $800 million.

A less persistent ‘iron filing’ might have taken his losses and drifted away at this point. By contrast, Mr. Greenberg’s interest in those asset sales has an inspirational quality to it, as befits his “greatest generation” bona fides.

This entry was posted by Chris Faille who is a journalist covering activist investing issues and a regular contributor to our blog.