Whitney Tilson Goes Activist on LECG Corp (XPRT) ~ market folly

Friday, February 25, 2011

Whitney Tilson Goes Activist on LECG Corp (XPRT)

Whitney Tilson and Glenn Tongue's hedge fund, T2 Partners, has filed an activist 13D with the SEC regarding shares of LECG Corporation (XPRT). Due to portfolio activity on February 14th, T2 now shows a 5.24% ownership stake in the company with 2,001,148 shares.

This is a substantial increase in their position as they only owned 614,816 shares at the end of 2010. All told, this marks a 225% boost in their stake. Their activist filing contains the normal boilerplate that they believe the company is undervalued and represent an attractive investment opportunity. The hedge fund currently does not have a present plan or proposal.

A press release from LECG could explain why T2 has become active:

"On February 7, 2011, the Company announced that it had received a non-binding indication of interest from an undisclosed company with a view toward entering into a definitive acquisition transaction for the entire firm. The Company is disclosing today that FTI Consulting, Inc. provided the non-binding indication of interest. The negotiations with this party are now focused on the possible acquisition of several specific practice groups within LECG and not an acquisition of the entire firm. LECG believes this alternative, whether with the identified party or one or more other parties, may be the most viable path for the Company to raise capital to address current liquidity concerns."

In other T2 Partners portfolio activity, we detailed how Tilson covered his Netflix (NFLX) short position. Some investors have always opined that a short-seller capitulation could possibly mark a top in a stock. While NFLX shares are down ever since Tilson covered, the market as a whole has seen weakness as of late. You can read why T2 cut short exposure as well.

Per Google Finance, LECG "provides services through its experts and professional staff whose skills and qualifications provide the Company the opportunity to address unstructured business and public policy problems. LECG delivers independent expert testimony and original authoritative studies in both adversarial and non-adversarial environments."

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