Thursday, December 18, 2008

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.

Saturday, December 13, 2008

Real Time Activist Investment Updates on

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

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, provides insights, analysis and detailed investment recommendations from top investment professionals, all in real time.

Thursday, December 11, 2008

10 Reasons Why 2009 Will Bring More Activism

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

Wednesday, December 10, 2008

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

Wednesday, December 3, 2008

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

Tuesday, November 18, 2008

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 following the presentation.

Tuesday, November 4, 2008

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

For additional information on any specific transaction contact Damien Park at 215.325.0514 or

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 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

Tuesday, October 28, 2008

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, 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

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 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”

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.

Wednesday, October 22, 2008

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:

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.

Tuesday, October 7, 2008

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

For additional information on any specific transaction below, contact Damien Park at 215.325.0514 or

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

Monday, October 6, 2008

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

Sunday, October 5, 2008

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

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.