XL Capital Ltd. (NYSE: XL) shares surged higher after Chairman Brian O'Hara involuntarily sold nearly 80% of his common stock on October 9th in order to meet a margin call. This isn't the first time such a disclosure was made either. Earlier this week, Chesapeake Energy CEO Aubrey McClendon sold a half billion of his company's common shares in order to meet a similar margin call. It appears that much of the decline last week may have been due to these margin calls!

"I regret that last Thursday I was forced to sell approximately 80% of my XL shares," said Mr. O'Hara. "I had pledged those shares as collateral to secure a personal loan used to fund purchases of XL shares in order to avoid the expiration of certain options. The forced sale was due to the precipitous drop in XL's share price last week. The sale in no way reflects the lack of confidence in XL's current and future prospects."

Shareholders were happy to hear this as the huge selling last week was not due to a change in company fundamentals. Rather, it was simply an executive that was being forced to sell for no fundamental reason. This led shares to rally over 50% on the day. XL Capital Ltd (XL) is a provider of insurance and reinsurance coverage to industrial, commercial and professional service firms, insurance companies and other enterprises on a worldwide basis.

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Chesapeake Energy Corporation (NYSE: CHK) shares have been under substantial pressure lately after chief executive Aubrey McClendon sold some $569 million of common stock on the open market. The big question was why? Investors now know that the insider was forced to sell substantially all of his holdings in just three days in order to satisfy margin loan calls. Margin calls take place when holdings in a persons portfolio fall below the loaned amount, forcing the broker to sell open stock positions to cover.

Shareholders applauded the news that it wasn't a hedge fund or voluntary party selling because of a change in sentiment. Shares soared more than 20% mid-day, which partially covered the losses seen during the massive sell-off. The announcement also caught shareholders offguard as Mr. McClendon liked to boast that he never sold a single share of Chespeake Energy in years. It turns out that the borrowing against his holdings turned to out hurt him in the end as the leverage killed his position.

"I got caught up in a wildfire that was bigger than I was," Mr. McClendon said Saturday. He declined to discuss his personal finances in detail, but said his personal situation was stable. "I'm fortunate that I have other resources and I'll be fine." Currently, McClendon owns less than $32 million in Chesapeake shares. However, the executive was quick to note that the company wouldn't get caught in the same leverage problems that he has had.

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Spanish Broadcasting System Inc. (NDAQ: SBSA) shares have fallen over 80 percent since the summer began and is now in danger of being delisted from the Nasdaq. Once in the spotlight thanks to a quickly growing Spanish market, Spanish broadcasting firms are quickly losing ground thanks to the economic slowdown and advertising weakness. Analyst downgrades citing weak momentum with no upturn yet in sight hasn't helped the cause either.

Spanish Broadcasting shares have fell from a high of $20 per share in 1999 to just $0.24 right now. In the meantime, at least one activist shareholder has been trying to unlock value. Discovery Group has insisted that the company form a special committee to explore strategic alternatives, including a going-private transaction, sale to a strategic party, or at least the adoption of modern corporate governance practices.

Investors believe that Spanish Broadcasting may hold a number of properties that large media channels may be interested in acquiring. The company enjoys market leadership position, operating in a highly attractive geographic market and is situated in the most promising media genre. However, CEO Alacron has refused to entertain any offers that would involve him relinquishing control of the company. This includes offers that have already been made at a substantial premium.

According to a letter sent months ago:

"We now know this claim to be justified because we have direct knowledge of an important public media company (“XYZ”) that is interested in a potential transaction that could yield a substantial premium to the current SBSA stock price, yet Mr. Alarcon refuses to engage in an evaluation of this opportunity. During a meeting with Mr. Alarcon in December 2007 members of our firm presented the rationale for a combination with XYZ, to which SBSA would bring great strategic value and substantial, immediate cost synergies. Mr. Alarcon concurred with the analysis and suggested that we get the reaction of XYZ’s management to the idea.

"Our team met in January 2008 with XYZ’s Chairman/Chief Executive Officer and its Chief Financial Officer. We communicated to Mr. Alarcon that the XYZ officials were very enthused about the possible combination and wish to engage in a further dialogue directly with Mr. Alarcon. Mr. Alarcon is also in possession of detailed materials prepared by Discovery that outline a proposed structure for this transaction which yields a premium in excess of 100% to SBSA shareholders.

"Suddenly and without explanation, Mr. Alarcon refuses to discuss this opportunity. While Mr. Alarcon’s change in posture is consistent with his industry reputation, it is surprising nonetheless. Mr. Alarcon’s resistance in this case cannot be attributed to valuation because the proposed structure gives him the option to either remain invested or liquidate his shares. Rather, it appears that Mr. Alarcon fears a loss of control. That fear is interfering with Mr. Alarcon’s ability to act in the interest of all shareholders."

It is clear that there is a lot of value that can be unlocked if Discovery Group can successfully pressure Spanish Broadcasting into at least entertaining such offers. Moreover, a simple move to modernize governance practices would enable shareholders to more forcefully make demands designed to maximize value. In the end, this is a valuable company being held back by a poor management team, but Discovery Group aims to change all that.

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Brooks Automation (NDAQ: BRKS) shares jumped higher after a large holder demanded that the company commit to an immediate and continuing substantial share repurchase program. The request was initially made by activist investor David Nierenberg on October 6th in a letter addressed to chief executive Robert Lepofsky. The letter called on the company to utilize free cash over the next three or four years to fund an aggressive share buyback program.

Nierenberg believes that Brooks has, and can generate, sufficient cash over the next three or four years to both fund an aggressive share repurchase program, which would nearly halve their share count relative to Brooks' 77 million shares before their first repurchase, and enable Brooks to roughly double its revenues relativel to their current revenue run rate, through organic growth and acquisitions. The activist urged them to act now while the share price is weak.

The program will enable Brooks to grow their earnings per share and increase return on invested capital by actively managing three variables: revenue growth, costs, and capital expenditures. Similar long-term programs have been used to successfully build shareholder value at Teledyne from 1972 to 1984, and for decades at Loews Corporation and Washington Post. At Teledyne the repurchase program enabled it to increase EPS nearly six times faster than net income.

Finally, Nierenberg provided an example: If Brooks were to repurchase 26 million shares at a hypothetical average price of $10 per share over the next several years, it would only require $260 million, which leaves $198.4 to $318.0 million for acquisitions in the future. The result would be a share price for Brooks of between $26.40 and $44.25 a piece at 15x earnings. Meanwhile, if money is tight, the company can monetize all of their real estate.

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INX Inc. (NDAQ: INXI) shares fell today after the company released news relating to its order book. The order book increased 47%  with September bookings increasing by 17% in total while the last two weeks saw bookings jump by 33% in total. However, this strong growth was met by concerns that orders may slow as the economy weakens.

INX noted, "While demand by customers has been healthy right up through the last two weeks of September, our sales staff are indicating that some customers are delaying moving forward with some large projects, and it is logical that the uncertainty of the last several weeks will cause some enterprise organizations to delay cap-ex expenditure projects."

INX is a provider of IP networked based solutions for enterprise-class organizations, such as corporations, schools and federal, state and local governmental agencies. The company's solutions consist of network infrastructure, IP voice and video communications systems, wireless network connectivity, network storage solutions, data center, and network and data security.

Shares of INX are down $0.29, or 4.61%, to $6.00 per share.

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The stock market may be struggling, but defense companies are still on their feet. Several contracts were announced today in this sector, indicating that defense spending is still going strong and some public companies are well-positioned to profit. TWo wars have done a lot to sustain spending, but some are concerned about at least one presidential candidate is interested in withdrawing troops and putting an end to the Iraqi conflict.

Lockheed Martin (LMT) announced a $41 million contract from the US Transportation Command to extend sustainment of Global Transportation Network command and control system. The sustainment contract brings the total value of the contract to $475 million. Kratos Defense & Security Solutions (KTOS) announced that its Madison Research Division had been awarded a $10.3 million contract from the U.S. Army on behalf of the Experimentation Division.

Recently, the Senate passed a military spending bill that includes a pay raise for military personnel. The bill will permit $612.5 billion in spending for military programs in 2009 with $70 billion for Iraq operations and Afghanistan. The pay increase for military personnel will be 3.9 percent. These new spending approvals will pave the way for future awards for these defense contractors and allow expansion in market share.

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Pharmacopeia, Inc. (NDAQ: PCOP) shares continued their decline today after the company received a delisting notice from the Nasdaq Stock Market. The company actually received the notice on September 30th indicating that it was not in compliance with the continued listing requirements because the market value of its listed securities was below $50 million for 10 consecutive trading days. This could spell bad news for shareholders as liquidity is greatly reduced upon delisting.

The company is currently involved in a deal to be acquired by Ligand Pharmaceuticals Incorporated (NDAQ: LGND) in a deal valued up to $70 million. The deal is based off of the price of Ligand shares, which have fallen sharply in recent days. The transaction is structured as a stock-for-stock exchange with an added kicker. Ligand willissue about 17.5 million shares, or 0.58 shares for each outstanding Pharmacopeia share. This will give Ligand 84% of the combined company.

Pharmacopeia is a clinical development stage biopharamceutical company dedicated to discovering and developing small molecule therapeutics to address medical needs. It has a portfolio of clinical and preclinical candidates under development internally or by partners, including eight clinical compounds in Phase II or Phase I development addressing multiple indications, including hypertension, diabetic nephropathy, muscle wasting, inflammation and respiratory disease.

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Warren Buffett is well-recognized as a smart investor, which should be giving investors a clue. The billionaire investor has recently agreed to purchase shares in two institutions facing sharp declines: General Electric (NYSE: GE) and Goldman Sachs (NYSE: GS). Many investors are speculating that he was brought into these deals to calm fears, but he is not exactly playing on a level field. Under both of these deals, the billionaire receieved preferential treatment...

The billionaire purchased a $5 billion stake in Goldman Sachs last month, but it wasn't just common stock. The billionaire received $5 billion in perpetual preferred stock and 43.5 million warrants priced at $115 per share. These warrants give the investor a theoretical 16% stake in Goldman Sachs - one of the world's premier investment banks - for only $5 billion in investment. In fact, with shares trading at around $130 a piece, Buffett has already made $650 million in paper profits!

Buffett also managed to pick up cheaper than normal shares of General Electric. The billionaire invested $3 billion at a 9% discount to the stock's closing price Wednesday to buy up preferred stock that pays a 10% dividend. Buffett also stated that he would support measures to alleviate near-term liquidity concerns. Not only is the billionaire making a dividend on his investment, but he is also receiving a sharp discount.

So, before investors go believing that Warren Buffett's investments signal confidence - they should be sure to take a look at the terms of the deals...

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