Aladdin Knowledge Systems Ltd. (NDAQ: ALDN) shares jumped sharply earlier this week on media reports of a pending sale, but investors may want to wait for some solid numbers before taking action. Israel’s “TheMarker” reported that the security software provider may be sold to an affiliate of Vector Capital for $11 to $12 a share – well above the stock’s current trading price.

The numbers are mere speculation, however, given the deterioration in the financial markets. Originally, Aladdin received a non-binding proposal from Jasmine Holdco LLC, the affiliate of Vector, to buy all of Aladdin’s shares for $14.50 per share. However, the deal failed to materialize to date as the financing environment has presumably deteriorated for the acquiring company.

Regulatory filings show that it is unlikely that Jasmine will back off, however. The Vector Capital disclosed a 14.17% stake in the security company. The same regulatory filing also showed that the company extended its standstill agreement with Jasmine in order to presumably complete the financing on the deal. The large stake and agreement to extend are two signals that a deal is definitely in the works.

Investors are now waiting for a special meeting of the shareholders slated for January 9, 2009 where the terms of the deal are expected to be released. The price remains up in the air…

Related Companies
Macrovision Solutions Corporation (MVSN)
Digimarc Corporation (DMRC)
McAfee, Inc. (MFE)

Target Corporation (NYSE: TGT) may not seem like a bright spot in today’s market after shares were cut in half in 2008, but at least one activist investor is confident that value can be extracted from the retailer. William Ackman’s Pershing Square owns nearly 10% of the retailer and even created a separate fund to make a leveraged bet on a sharp turnaround.

Ackman’s theory relies on the fact that, unlike many other retailers, Target owns the land under its stores. Currently, this land is not valued at all in the retailer’s market capitalization. The activist investor believes that the true value of this land could be $40 billion or more given the location and tenant (Target). The problem is: How can we unlock that value?

Ackman proposed that Target spin-off its land into a real estate investment trust (REIT) that would then lease the land back to Target. Since the entity would be publicly traded on its own, it would have to come to its true value while Target would retain its value. Meanwhile, since the REIT would have Target as its tenant on its land with its buildings as collateral – a very safe bet.

The problem now is that Target seems hesitant to go through with the plan. Despite the fact that all major concerns were addressed, the retailer still believes that its credit rating and stock price may be adversely affected by the transaction. However, Ackman and Target are still likely in talks to smooth things over while investors wait for further comments from the company.

In the meantime, Pershing Square is hurting from Target’s demise. Pershing Square IV, which invests exclusively in the retailer with 2x leverage, lost 68% last year after Target’s stock slid 31% on the year. This adds to the fund’s losses of 43% in 2007 to make for a less-than-spectacular track-record. Investors are now questioning whether the plan will work.

However, Ackman is no stranger to being ahead of the game and remains confident. His short investment in bond insurers like MBIA took years to materialize and resulted in similar losses ahead of their big pay days. Target may turn out to be a similar story...

Related Companies
Wal-Mart Stores Inc. (WMT)
Costco Wholesale Corporation (COST)
Dollar Tree Inc. (DLTR)

Kona Grill (NDAQ: KONA) management is raking investors over the coals and they aren’t happy. Clarke Bennitt LLC was the first to uncover some questionable regulatory filings that clearly demonstrate a conflict of interest with shareholders. Now, many shareholders like Clarke Bennitt are demanding changes be made in order to restore confidence in the company, according to a Schedule 13D filing with the SEC.

A recent 8-K filing made with the SEC on December 29, 2008 was a shocking read to the shareholder. In the regulatory filing Marcus Jundt, chief executive of Kona Grill, quietly disclosed a large stock sale to his father at the ridiculously low price of $1.19 per share. Incredibly, this sale accounted for nearly 5% of the company’s outstanding shares!

Clarke Bennitt was also surprised by a Schedule 13D filing made by the second largest shareholder in the company. Mill Road Capital noted its opposition to a loan that violated the Sarbanes-Oxley amendments to the Act of 1943 prohibiting the company from directly or indirectly arranging loans to management. Further, the proposal wasn’t even part of a competitive bidding process.

It has become clear to these two shareholders that the Kona Grill is not operating in their best interest. Not only is it against the law to make personal loans to management, but the proceeds ended up coming from an under-market sale to an executive’s father for just $1.19 per share. The proposal hurts shareholders in two ways and they demanded it be rescinded immediately to ensure that a fair price is being achieved for both Kona Grill and its shareholders.

Related Companies
Benihana Inc. (BNHNA)
BJ’s Restaurants Inc. (BJRI)
Buffalo Wild Wings (BWLD)