Nabi Biopharmaceuticals (NDAQ:NABI) is under increasing pressure to expand its contract with Bank of America to include a possible sale of the company. Third Point, an activist hedge fund and majority holder of the company, sent their demands to management today in a 13D/A filing with the SEC. The meeting to decide if this new course of action should be implemented is due to take place on September 15th.

To understand why there is a problem with NABI, we must first look at the past. In their lengthy letter attached to the 13D filing, Third Point elaborated on their history with the company:

"When we first became Ligand shareholders last year our thesis was similar to that driving our Nabi investment: Ligand was an asset-rich company with value substantially above what Wall Street was giving it credit for, but the value of its assets was obscured by poor management and imprudent capital allocation decisions. When we concluded that it was highly unlikely that these values would ever be realized under existing management and Ligand's business plan, and that there was indeed a substantial risk that continued cash burn might eventually force management to sell off the company's valuable assets at fire sale prices, we demanded that Ligand immediately initiate a process to maximize shareholder value. The result is striking: the stock is up by 30% since we became involved; just last week Ligand announced the sales of its two commercial operations at extremely attractive prices; and the company has never been in a stronger financial position, nor had a more exciting future. Due to our direct and substantial involvement in the value maximization process, significant cash should be returned to Ligand's shareholders shortly, and the prospects for the "new" company's remaining R&D pipeline and partnered products is tremendously exciting."

The hedge fund also noted how unresponsive and evasive CEO Tom McLain was in dealing with shareholders. In particular, Third Point had difficulty obtaining access to the company's books needed to complete a valuation of NABI to determine the best course of action. However, the fund noted that they "will not be deterred by the Company's attempts to ignore its shareholders and hide behind legal facades". At the end of the letter, Third Point summed up its argument:

"In sum, it is irrefutable that a majority of your shareholders vehemently oppose the long-term, highly-risky strategic plan that you continue to force upon us against our collective will (while, once again, you undertake very little risk yourselves due to your negligible outright holdings in the stock). You have had six months now to do your research and come to the only accurate conclusion - i.e., if you truly take your fiduciary, legal and moral obligations seriously you will agree to act upon the will of the majority of Nabi shareholders (many of whom have apparently now communicated with you directly) and empower BofA to explore all possibilities to maximize the significant asset values embedded within Nabi. As Mr. McLain has explained to us himself, it is very difficult for a small biotechnology company to succeed in the marketplace today. We agree, and when that company is not strongly capitalized and extremely well managed - Nabi being neither of these - it is nearly impossible. It is time that you finally acknowledge this and, should this prove to be the optimal outcome, place our valuable assets, at a substantial premium, in the hands of stronger operators."

If this proposal goes through, then there is a chance the company could be put up for sale at a substancial premium to its current market price. This makes it a stock definitely worth watching!

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Adams Express Company (NYSE:ADX) took some heat today from shareholders after the release of its proxy filing on September 6th. Karpus Management filed a 13D with the company containing a letter to the Board, which read:

"We have read your recently released preliminary proxy materials and are writing to you to express our dissatisfaction with the inherent shareholder disregard expressed in the materials.

In fact, while reading the preliminary materials, we found many instances where the proposed changes are argued to benefit the company's discretion in the long-run but find absolutely no compelling reason why it would be in shareholders' best interests to relinquish the key accountability measures listed in the proxy materials.

What's more, we can find no indication why it is that the Board is calling this special meeting altogether because in our belief it would have been more efficient and cost effective to have shareholders vote on these issues at the same time that they voted on the routine annual meeting matters back in March.

As an agent of the shareholders, the Board should be reminded that it is afforded the task of monitoring the activities of a Company's officers and/or managers and the overall performance of a Company so that it can enhance shareholder value. Given the circumstances before us, the Board appears to be failing in this task and also seems to forget about its duties to shareholders altogether."

The company is seeking to ammend its company charter in two ways:

• By requiring a larger 2/3 vote in order to convert the company from a closed-end mutual fund to an open-end fund. The difference is that closed-end funds are valued based on the demand for shares of their investment fund while open-end funds are valued based upon the NAV (net asset value) of the stocks that they hold. So, why is there anger over this by shareholders? Well, typically closed-end funds trade at a discount to their NAV (for a variety of reasons), so any conversion to an open-end structure would unlock this value for shareholders.
• By removing the rights of shareholders to ammend the company bylaws. Although the company notes that this technique has never been used on Adams Express, and is only used on rare occasions in the general market (when these provisions exist), it is a tool that activist shareholders could use to advance their own goals.
  

Clearly, it appears as if the company is worried about activist shareholders coming in and converting the fund from a close-end fund to an open-end fund to unlock shareholder value. This stock is worth keeping an eye on because if these provisions do not pass, that opens the door to potential activist shareholders to come in and try to unlock the stock's NAV value.

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Stratos International (NDAQ:STLW) announced today in a press release that the company would be exploring strategic alternatives, which could include a possible sale of the company. The company also said that it had retained CBIC World Markets Corp as its exclusive advisor. The story becomes interesting when we see that activist hedge fund Steel Partners is a majority holder, holding almost 15% of the company.

The company noted in its press release that:

"Steel Partners II, which issued a press release in June indicating that Steel Partners might be willing under some circumstances to make an offer for Stratos, would be welcome to participate in the process."

So, what was this offer? Well, if we look back to their June 13D/A filing with the SEC, we can see the following:

"We believe we have exhausted all our efforts to privately discuss with the Board  of  Directors a value enhancing  transaction in any  meaningful way. Accordingly, Steel  Partners II, L.P. publicly sets forth its willingness to offer to acquire all of the common stock of Stratos it does not  already own, through one of its affiliates or other appropriate  acquisition entity by merger or otherwise, for $7.50 per share in cash (the "Transaction"). Our proposal is not subject to any financing  contingency. This  represents a  substantial  23% premium to the current market price of $6.09 per share. We believe this all-cash offer will provide shareholders immediate liquidity and an immediate opportunity to maximize their investment in the Company. We urge the Board to allow the Company's  shareholders to have the opportunity to decide whether to accept our proposal.

We propose that the Transaction be accomplished through a definitive tender offer/merger agreement. Our proposal is conditioned upon satisfactory completion of due diligence typical for a transaction of this type (our  familiarity  with the Company  should  enable us to complete  all  required  due  diligence on an expedited basis), obtaining all necessary consents and approvals,  waiver of any Company  anti-takeover  provisions  including the Company's  shareholder  rights plan, other customary conditions for a transaction of this type and size and the execution  of a  definitive  agreement.

If as a result of our due diligence we find  evidence of  additional  value inherent in the Company  based on operating  results or  otherwise,  we would be willing to upwardly adjust the offer price to reflect such additional  value. We invite the Board to share with us any  documentation  in the Board's  possession which it believes  reflects  additional  value in the shares that it believes is not already known to us."

The stock is up 10% on the news, now trading at $6.70 - which is still a substancial discount to Steel Partners' offer of at least $7.50 per share. With such a large existing stake in the company, the hedge fund would be acquiring the rest of the company for cheaper than any other potential bidders. Whether or not additional bidders will show up remains to be seen; however, from what we know now, STLW appears to be trading at a steep discount to Steel Parters' June offer, and may be a buying opportunity even at these levels. Either way, it's a great stock to keep an eye on as the process of finding strategic alternatives begins...

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Steel Partners II LP is one of the most well-known activist hedge funds in the market today ran by 40-year-old Warren G. Lichtenstein, founder and principal of the billion dollar hedge fund. Through the years, the fund has built a track record of success through hostile takeovers and proxy battles. Like most activist funds, Steel Partners is simply attempting to give shareholders the money and rights that they deserve by replacing inefficient management and streamlining processes/spending.

In rare talk with Business Week last year, Mr. Lichtenstein offered some insight into his funds purpose and goals. He first noted that he thinks of Steel Partners more as a partnership that hedges itself by "buying cheap" than a stereotypical hedge fund. That is, instead of dealing in trading securities, he prefers to deal in terms of the companies they represent. Steel Partners has typically focused on finding undervalued companies (typically due to bad management) and unlocking that value. This usually involves replacing the Board, firing the responsible persons, and then unlocking the company's potential. Mr. Lichtenstein also told Business Week that he offered something management couldn't: Discipline. He said that his fund is focused on empowering people and held them accountable for their actions - something that corporate management these days struggles with. Finally, he revealed that his future plans are to focus his energy on larger companies with billion dollar market caps, because he finds them less risky despite being "riddled with inefficiencies and excessive costs".

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We first featured IMAX Corporation (NDAQ:IMAX) here back on August 11th when the stock was halved after a string of bad news. Since then, the stock had dropped another dollar or so before settling down in the upper $4 range. However, interest was renewed in today's trading as CNBC's Thomas Ko revealed that he added the stock to his portfolio, citing a potential buyout. Ko made the argument that the stock was at $10 when they were unable to find a buyer in the Board's range (most likely around $15), now it is much more attractive. Currently, the stock is trading in the $5 range - a 50%+ discount from its high a month earlier. Ko believes that many companies, potentially including Walt Disney Co. (NYSE:DIS) and Sony Corp. (NYSE:SNE), might be interested in the company in the $7 area. At this point, a buyout between $7 and $9 would be difficult for the Board to turn down, given the recent SEC investigations and other issues plaguing the company. Moreover, if the Board expressed interest in a sale before this entire ordeal happened, it is perhaps more likely that they would consider any opportunities in their situation now.

This speculation caused the stock price to surge 10% to settle at $5.27 on the day. It is likely that day traders will now be involved in the stock, and may cause significant near-term volatility. Also remember, a buyout is still nothing more than a rumor. However, the company remains cheap at its current levels and we know the Board was (and perhaps still is) interested in a sale of the company. These factors justify at least keeping an eye on the company throughout the next few months as things get clearer.

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Weatherford International Ltd. (NYSE:WFT) revealed today in a Form 4 filing with the SEC that director Robert Moses purchased 53,544 shares on Monday at prices ranging from $39.88 - $39.99. This $2 million purchase follows a rush of other smaller puchases by company officers and directors on September 1st. Weatherford provides equipment and services used for the drilling, completion, and production of oil and natural gas wells in the U.S. Some are speculating that this move relates to the company's earlier announcement of a successful installation of their "Life of Well" system. In that announcement, the company gave an overview of the system:

"Weatherford's Life of Well(TM) optical in-well system is providing both continuous seismic and pressure/temperature monitoring data and is also interfaced to the existing permanent ocean bottom cable system. This allows for the simultaneous collection of permanent seabed and downhole seismic data representing a significant milestone for the industry."

Although a report issued yesterday argued that value investors should wait to invest in oil services companies, investors applauded the insider buying as the price rose 5.45% in mid-day trading today.

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Bloomberg reported this morning that RCN Corp (NDAQ:RCNI) may be considering a possible sale of the company, after it retained Blackstone Group LP as an advisor to the company. The company - which only recently emerged from bankruptcy - moved up 7% on the news. But is there any substance to this deal? If so, how much would the deal be worth?

When many people consider buyout situations, the first thing they look at is the Enterprise Value (EV), which takes into account the company's market cap, debt, minority interest, preferred shares, and cash. This tends to give a more accurate estimate as to the worth of a company because it takes into account both debt and cash - which would have to be acquired with the company. RCN has an EV of $1.07 billion or approximately $28.80 per share, a premium to even today's price. The company also sold some of its assets in the past (seen in this 8K), where its customers were valued at $2,500 each. Using this valuation, we can estimate that their customer base alone (418,000 as of April) is worth about $1.04 billion. Considering the company only has around $205 million in debt, $98 million in cash, plus the potential for a premium, makes the company look attractive as an asset buyout play.

Whether or not the deal will go through depends on a number of factors; however, it is definitely a strong possibility. Any actions taken by the Board to steer the company in this direction can be found in future SEC filings - most likely 8K filings. This stock is definitely a good one to keep an eye on as these events continue to unfold!

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Gold Kist Inc. (NDAQ:GKIS) announced today that it had hired Gleacher Partners LLC to assist it with a review of its strategic plans aimed at maximizing shareholder value. This group will be added to the already lengthy list of advisors, including Merrill Lynch, Alston & Bird. All of this comes as a result of an unsolicited buyout offer from Pilgrim’s Pride Corp (NYSE:PPC) valued at $20 per share in cash on August 21st. More recently, the company also disclosed via a 13G filing with the SEC on August 31st, that Citadel had upped its stake in the company to 6.9%. Note that Citadel is one of the world’s largest hedge funds, with an impressive track record and a bias towards activism.

So, what happens next? Well, considering the bid from Pilgrim's represented a 50%+ premium to the market close (in a market where many of the major players have suffered large losses on the year) many thought that they would take the offer in a heartbeat. However by hiring an additional advisor today, the company hinted that it would not be that simple. Many are speculating that the company may solicit other bids to see if a higher premium can be attained via an auction process. One thing is for certain, however: With a hedge fund like Citadel behind the scenes, it is highly unlikely that the company will reject the idea of a buyout.  

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Goldman Sachs Group, Inc. (NYSE:GS) released another impressive earnings report in an 8K filed with the SEC today. This announcement comes after investors have seen the stock decline by 10% since its record last quarter, just on fears that the company wouldn’t be able to maintain its impressive growth. However, despite a seasonal slowdown in trading revenues, the investment bank still beat the street estimates, earning $3.26 per share against a $2.97 consensus.

Highlights featured in an attached press release included:

• During the third quarter, Goldman Sachs surpassed its previous annual record for net revenues and earnings per common share.
• The firm continued its leadership in investment banking, ranking first in worldwide announced and completed mergers and acquisitions, equity and equity-related offerings and public common stock offerings for the calendar year-to-date. (3)
• Fixed Income, Currency and Commodities (FICC) generated its third highest quarterly net revenues of $2.74 billion.
• Assets under management increased to a record $629 billion, 21% higher than a year ago, including net asset inflows of $30 billion during the quarter.
• Securities Services produced its second best quarterly net revenues of $537 million.
  

So, will this growth continue? Well, the company announced that it would buyback an additional 60 million shares which certainly shows a lot of confidence. Moreover, the 8K also mentioned that the company’s strong backlog remains strong and shows no signs of slowing down. The company has great management that has consistantly shown its ability to outperform. With a share price down 10% on speculation that this quarter would be bad, this may be a good time to pick up some shares after this notion was proven wrong. Other companies to watch include competitors Lehman Brothers (LEH), Bear Stearns (BSC), and Morgan Stanley (MS) - all due to announce their own results over the next week.

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Activist hedge funds play a large role in the modern marketplace - we can hardly go one day without hearing the phrases "strategic alternatives" or "maximize shareholder value" mentioned in 13D filings with the SEC! The sheer number of leveraged buyouts, private equity buyouts, corporate takeovers, proxy battles, restructurings, liquidations and other shareholder-led corporate activity has increased dramatically during the past few years and shows no signs of slowing. As a result, it is becoming increasingly important for individual investors to learn the many players involved with these types of deals in order to know how to react when their portfolio companies are affected by these groups.

The SEC Investor will begin profiling several hedge funds during the coming weeks in order to reveal who exactly is behind each funds, what types of investments they are involved with, and most importantly, where to find information about their investments and objectives within SEC filings. Armed with this information, investors can not only be more secure in their own investments, but also find new opportunities to quickly profit in today's market.

Here is a shortlist of the funds that we will be profiling:

• Appaloosa Management
• Bulldog Investors
• Cannell Capital
• Carlos Slim Helu
• Cevian Capital
• Children's Investment Fund Management
• ESL Partners (Mr. Lampert)
• Harold Simmons
• Icahn, CCI (Mr. Icahn)
  
• Liberation Investment Group
• Pardus Capital Management
• Perry Corp
• Pershing Square Capital Management
• Relational Investors
• Richard Blum
• Schultze Asset Management
• Steel Partners
• Third Point
• Tracinda Corp (Mr. Kerkorian)
• Trian Group

* Note that this list represents a mere fraction of the number of activist hedge funds in existence; however, these are the funds that typically target the largest companies (affecting the most shareholders).