Mark Cuban charged with insider trading
SAN FRANCISCO (MarketWatch) -- High-profile billionaire Mark Cuban was charged Monday with insider trading by the Securities and Exchange Commission after he allegedly sold shares of an Internet search company based on non-public information, sparing himself about $750,000 in losses.
The SEC has accused the technology entrepreneur and owner of the Dallas Mavericks basketball team of selling shares of Mamma.com in June 2004, hours after he allegedly learned of a planned stock offering by the company that promised to undercut its stock price -- and before news of the offering became publicly available.
According to the complaint, Mamma.com invited Cuban to participate in a so-called "PIPE" stock offering, after he agreed to keep the information confidential. Such stock offerings provide companies with a means to raise capital relatively quickly, but can also dilute a stock's value. Within hours of learning of the planned PIPE offering, Cuban proceeded to sell his 6% ownership stake in Mamma.com, the SEC says. The agency says that by insulating himself from a subsequent drop in Mamma.com's share price, Cuban avoided losses of more than $750,000.
Mamma.com is an Internet search engine owned by Copernic Inc.
<IMG class=pixelTracking height=1 width=1 border=0>CNIC) , based in Montreal.
"Mamma.com entrusted Mr. Cuban with non-public information after he promised to keep the information confidential... Mr. Cuban betrayed that trust by placing an order to sell all of his shares," SEC Division of Enforcement Deputy Director Scott Friestad said in a statement. "It is fundamentally unfair for someone to use access to non-public information to improperly gain an edge on the market."
In a statement posted on his blog, Cuban said that, "I am disappointed that the Commission chose to bring this case based upon its Enforcement staff's win-at-any-cost ambitions. The staff's process was result-oriented, facts be damned. The government's claims are false and they will be proven to be so."
A 'red flag' for sports leagues?
Despite his adversarial statement, Cuban may well choose to settle with the SEC. That way, he would avoid a trial and wouldn't have to admit or deny the accusations, said James Sanders, head of the Los Angeles Trial Department for the law firm McDermott Will & Emery.
If he opts to fight the SEC at trial, a loss would become a blemish for Cuban requiring disclosure in subsequent investments he makes in public companies. "That would be a disclosure item that would trail him into the future," Sanders said.
In addition, if the SEC wins its case it could have an impact on Cuban's ability to own sports franchises such as the National Basketball Association's Mavericks, Sanders said. Cuban is also now reportedly angling to purchase the storied Chicago Cubs baseball team.
"It's a fraud case," Sanders said, adding that any sports league associated with Cuban would have to "make a judgment about how that has some impact on his ownership."
Cuban, a prolific chronicler of his own life online, described Mamma.com's PIPE offering in a March 2005 blog post. He described the effort as "a huge red flag," and said it induced him to sell his Mamma.com stock. "I don't want to own stock in companies that use this method of financing. ... Because I don't like the idea of selling ... stock for less than the market price," Cuban wrote.
Cuban is a founder of Broadcast.com, which was sold to Yahoo Inc. <IMG class=pixelTracking height=1 width=1 border=0>YHOO) for $5.9 billion in 1999. In addition to owning the Mavericks, Cuban has also founded HDNet, a high-definition cable TV network.
In an earlier posting on his blog in 2004, Cuban offered tempered praise for Mamma.com. The search company, he wrote, is "not Google or Yahoo, nor will it be a top 5 search engine any time soon. But it is a good metasearch tool that I use and have used."
During a phone call with Mamma.com's chief executive in June 2004, Cuban was informed of the PIPE offering. He then "became very upset and angry," adding at the end of the call, "Well, now I'm screwed, I can't sell," according to the SEC's complaint.
SAN FRANCISCO (MarketWatch) -- High-profile billionaire Mark Cuban was charged Monday with insider trading by the Securities and Exchange Commission after he allegedly sold shares of an Internet search company based on non-public information, sparing himself about $750,000 in losses.
The SEC has accused the technology entrepreneur and owner of the Dallas Mavericks basketball team of selling shares of Mamma.com in June 2004, hours after he allegedly learned of a planned stock offering by the company that promised to undercut its stock price -- and before news of the offering became publicly available.
According to the complaint, Mamma.com invited Cuban to participate in a so-called "PIPE" stock offering, after he agreed to keep the information confidential. Such stock offerings provide companies with a means to raise capital relatively quickly, but can also dilute a stock's value. Within hours of learning of the planned PIPE offering, Cuban proceeded to sell his 6% ownership stake in Mamma.com, the SEC says. The agency says that by insulating himself from a subsequent drop in Mamma.com's share price, Cuban avoided losses of more than $750,000.
Mamma.com is an Internet search engine owned by Copernic Inc.
<IMG class=pixelTracking height=1 width=1 border=0>CNIC) , based in Montreal.
"Mamma.com entrusted Mr. Cuban with non-public information after he promised to keep the information confidential... Mr. Cuban betrayed that trust by placing an order to sell all of his shares," SEC Division of Enforcement Deputy Director Scott Friestad said in a statement. "It is fundamentally unfair for someone to use access to non-public information to improperly gain an edge on the market."
In a statement posted on his blog, Cuban said that, "I am disappointed that the Commission chose to bring this case based upon its Enforcement staff's win-at-any-cost ambitions. The staff's process was result-oriented, facts be damned. The government's claims are false and they will be proven to be so."
A 'red flag' for sports leagues?
Despite his adversarial statement, Cuban may well choose to settle with the SEC. That way, he would avoid a trial and wouldn't have to admit or deny the accusations, said James Sanders, head of the Los Angeles Trial Department for the law firm McDermott Will & Emery.
If he opts to fight the SEC at trial, a loss would become a blemish for Cuban requiring disclosure in subsequent investments he makes in public companies. "That would be a disclosure item that would trail him into the future," Sanders said.
In addition, if the SEC wins its case it could have an impact on Cuban's ability to own sports franchises such as the National Basketball Association's Mavericks, Sanders said. Cuban is also now reportedly angling to purchase the storied Chicago Cubs baseball team.
"It's a fraud case," Sanders said, adding that any sports league associated with Cuban would have to "make a judgment about how that has some impact on his ownership."
Cuban, a prolific chronicler of his own life online, described Mamma.com's PIPE offering in a March 2005 blog post. He described the effort as "a huge red flag," and said it induced him to sell his Mamma.com stock. "I don't want to own stock in companies that use this method of financing. ... Because I don't like the idea of selling ... stock for less than the market price," Cuban wrote.
Cuban is a founder of Broadcast.com, which was sold to Yahoo Inc. <IMG class=pixelTracking height=1 width=1 border=0>YHOO) for $5.9 billion in 1999. In addition to owning the Mavericks, Cuban has also founded HDNet, a high-definition cable TV network.
In an earlier posting on his blog in 2004, Cuban offered tempered praise for Mamma.com. The search company, he wrote, is "not Google or Yahoo, nor will it be a top 5 search engine any time soon. But it is a good metasearch tool that I use and have used."
During a phone call with Mamma.com's chief executive in June 2004, Cuban was informed of the PIPE offering. He then "became very upset and angry," adding at the end of the call, "Well, now I'm screwed, I can't sell," according to the SEC's complaint.
