Plains Exploration & Production Company (NYSE:PXP) may face some opposition to its pending acquisition of Pogo Producing Company (NYSE:PPP) after Fir Tree Partners disclosed a 9 percent stake and argued against the merger in a Schedule 13D filing with the SEC.

"Our decision is based upon detailed financial analysis which suggests that a termination of the transaction could result in PXP’s share price appreciating by 70% or more over the ensuing year," said the activist hedge fund in a letter to the company's board.

"Large scale share repurchases are a much more efficient use of shareholder capital given the extreme decline in PXP’s share price that was sparked by the announcement of the PPP deal and the negative natural gas price environment which makes PPP a less attractive/less valuable asset."

The initial deal announced in July seemed like a great idea to most shareholders as it would have provided accreditive cash flows to the PXP shares in the near term and diversify its reserves. However, since this announcement the macro environment and industry fundamentals have changed materially.

Moreover, PXP has lost about $1 billion in shareholder value as a result of the announcement. A share repurchase - on the other hand - would have allowed the company to repurchase 30 percent of the company while maintaining a debt/EBITDA ratio of 2.0x to 2.5x.

"We believe PXP will generate over ~$1 billion in after-tax proceeds over the next twelve months from the opportunistic sale of its non-core assets. Accordingly, the company could use the proceeds from these divestitures to repurchase 20-25 million shares," said Fir Tree Partners.

"Assuming the company was valued at comparable company levels, PXP shares would be worth $70-75, representing 70-90% upside from current share levels. We believe upside remains to this valuation if the company successfully completes the formation of an upstream master limited partnership."

What happens with the proposed acquisition remains to be seen, but this stock is definitely one worth watching!

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HSBC Holdings (NYSE:HBC) board members and executives may find themselves in trouble soon after Knight Vinke revealed a campaign to change the bank's strategic direction. The activist hedge fund has enforced change in large companies like Shell and Gaz de Frace before by rallying support of other large investors while holding just a small stake of its own.

Knight Vinke said in a statement late Thursday that it intends to engage in "constructive dialog" with Europe's largest bank over the "future direction and governance of the group". The hedge fund had reportedly already held discussions with the chairman and finance director beginning in mid-May.

Analysts and investors have questioned the timing of this statement, however, given that the bank has already shifted its focus to the emerging markets and has been one of the best performing banks in the market over the past months. In the past, the hedge fund has managed to rally support because the company's were not enacting change and were performing below their potential.

Whether or not the activist hedge fund can rally other investors to make changes remains to be seen, but this is definitely a stock to watch in the meantime!

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KSW Inc. (AMEX:KSW) shares have rose more than six percent since Richard Silberberg's Moab Capital Partners disclosed a 6.2 percent stake in the company calling its shares "significantly undervalued" in a Schedule 13D/A filing late last week. Many shareholders are hoping that this new attention could help the company unlock value.

"[We] purchased the shares in open market transactions because in their opinion, the highly-regarded management team of KSW, Inc. has created a unique value-engineering business proposition which is driving the issuer’s superior growth in backlog, revenue and earnings margins," said Moab Capital Partners in a statement.

KSW furnishes and installs heating, ventilation and air conditioning (HVAC) systems and process piping systems for institutional, industrial, commercial, high-rise residential and public works projects, which is quickly becoming a hot business in places like New York City where the company operates.

KSW also continues to post strong earnings. Early last month, the company reported net income of $0.12 per share compared to $0.10 per share last year. If you take stock compensation and other expenses out of that number, they made $0.14 per share - a 40% year-over-year rise in net income. More, this is one declining revenues as a result of more difficult market conditions that are just now starting to turn around.

Moab Capital Partners said, "[We] believe the shares are significantly undervalued as of August 20, 2007 ... [the company] is well capitalized and poised to expand its business within the New York City metropolitan market and beyond." Combined, these factors make KSW a stock worth watching!

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