TransAlta Corporation (NYSE: TAC) directors are facing increasing pressure to sell after a popular activist hedge fund added its voice to a chorus of dissident shareholders. The Children's Investment Fund Management, known as TCI in the investor community, filed its Schedule 13D with the SEC last week showing a six percent stake and demanding some changes. The activist hedge fund wants the company to consider an auction or stragic partnership to boost shareholder value.

Here's a transcript from the letter to the board:

TCI believes  that the public  proposal by LS Power  Equity  Partners and Global Infrastructure  Partners  published  on 21 July 2008 to  acquire  TransAlta  for Cdn$39 per share, significantly undervalues the company.

TCI urges the Special  Committee to immediately  undertake a review of strategic alternatives,  complete  this  expeditiously  and  take all  necessary  steps to maximise value for shareholders.

Further, TCI agrees with the  representations  made to you by Seneca Capital in its  public letter dated 22 July 2008.

TCI  would  welcome  an open and  direct  dialogue  with the  Special  Committee throughout the strategic review process.

TransAlta is a wholesale power generator and marketer focused on the western regions of Canada and the United States. The company owns, operates and manages a contracted and geographically diversified portfolio of assets, and has capability in generation fuels, including coal, natural gas, hydro and renewable energy. Approximately 70% of its capacity is contracted under government-mandated power purchase agreements or long-term contracts.

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Cablevision Systems Corporation (NYSE: CVC) management may find themselves in hot water after an acitivst hedge fund built up a substantial stake in the cable operator. Harbinger Capital disclosed an 8 percent stake in the company and demanded changes in a Schedule 13D filing with the SEC. The activist hedge fund suggested that shares of Cablevision are undervalued and the company must take certain actions to unlock value.

Traditionally, activist hedge funds aim to force companies to unlock value through a variety of so-called strategic alternatives. These can include a sale or breakup of the company, a change in capital structure, a share buyback or a special dividend. Companies that aren't open to taking these actions will typically face an expensive proxy fight, which involves the activist hedge fund nominating its own directors to the company's board.

Harbinger Capital has experience in this industry as well. Media General and The New York Times were both subjected to demands from the activist hedge fund. Representatives from the hedge fund won three seats on the board of MEdia General while the New York Times agreed to nominate two of its directors after it threatened a proxy fight. So far, Cablevision has agreed to institute its first-ever dividend and is holding meetings with shareholders to discuss other ideas.

Cablevision shares are trading up marginally on the news, moving to $32.47 per share in mid-day trading. It will be interesting to see how many changes Harbinger can force upon Cablevision to unlock value, or whether they will be forced into a proxy battle to overthrow management and institute them themselves.

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HSN, Inc. (NDAQ: HSNIV) complted its spin-off from IAC Interactive (NDAQ: IACI) today as a part of Barry Dillar's move to unlock value for shareholders. HSN is a leading multi-channel interactive retailer with some of the most dynamic brands and experiences in the retailing industry. As an independent company, investors are hoping that shares will be valued much higher than it was as a part of IACI. However, some experts aren't so sure that value will be unlocked...

Traditionally, spin-offs have outperformed the S&P 500 by a wide margin during their first three years as a public company. The reason is simply because parent company shareholders often have little appetite for the new spin-offs while they are also loaded with debt and have no fall-back. This combination of factors often lead to a sell-off during the first year that leaves room for enterprising investors to jump in and realize substantial gains as the stock returns to a fair value.

Chief Financial Officer Tom McInerney said in an interview that the value of the new companies should be much more than it is now and he hopes that it will be very obvious in a year. However, some analysts aren't so confident in additional value being unlocked. HSN was considered the division that was most undervalued, but analysts insist that HSN's problems are significantly worse than expected. Other businesses under the IACI umbrella are also continuing their decline early on.

In the end, these spin-offs may present opportunities to shareholders, but not in the obvious way. Many believe that the shares of these new companies, like HSNi, will fall substantially early on. Only after this initial fall will investors have a good entry point to get in and profit. The reason? Parent company shareholders will likely sell the new spin-offs while the performance of the companies continues to deteriorate in these tough markets.

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