I’ve always admired Mark Cuban and his “maverick” style of being himself no matter the cost. If you’re familiar with Cuban’s NBA career he has been fined an ungodly amount by the NBA for refusing to toe the line and keep his mouth shut.
That being said, sometimes very wealthy people have a tendency to forget that all the rules apply to them.
In June 2004 Cuban sold off all 600,000 of his shares in Mamma.com almost immediately after being asked by the company to participate in a dilutive offering.
Maybe it was a simple mistake or a temporary lapse in judgement. Either way, the SEC says that Cuban was not legally allowed to act on that information until it became public. e.g. insider trading.
The Commission’s complaint, filed in the U.S. District Court for the Northern District of Texas, alleges that in June 2004, Mamma.com Inc. invited Cuban to participate in the stock offering after he agreed to keep the information confidential. The complaint further alleges that Cuban knew that the offering would be conducted at a discount to the prevailing market price and that it would be dilutive to existing shareholders.
Within hours of receiving this information, according to the complaint, Cuban called his broker and instructed him to sell Cuban’s entire position in the company. When the offering was publicly announced, Mamma.com’s stock price opened at $11.89, down $1.215 or 9.3 percent from the prior day’s closing price of $13.105. According to the complaint, Cuban avoided losses in excess of $750,000 by selling his stock prior to the public announcement of the offering.
Cuban’s wealth is valued at $1.8 billion, one would have to think that $750,000 isn’t that big a concern to him, which begs the questions, “why did he do it?” Cuban is notoriously competitive and by his own admission “hates to lose“. In a post written in 2005, ironically calling the SEC out on not doing enough to enforce the act of naked short selling, Cuban mentions his sale of his Mamma.com stocks:
I wanted to reference Mamma.com. I had purchased stock in Mamma.com in hope that it could be an up and coming search engine. I thought I had done some level of due diligence. Talked to the company management. Talked to some employees who worked in sales. Read the SEC Filings. I knew that they had a checkered past and had been linked to stock promoter Irving Kott, and that their law firm still handled some of Kotts business, but the CEO, Chairman, lawyers all said that things were reformed and the company was focused on its business.
I don’t think it was ever about the $750,000 for Cuban. I think it was about the fact that he “hates to lose”. Cuban thought he had done his research and was upset that he was wrong:
I love businesses with low overhead, that don’t need to be technology leaders to succeed, that generate cash that they can put in the bank, and at some point, hopefully payout to shareholders. I think mamma.com has that potential.
Whether he did it for the money or for his ego, I’m not sure the SEC is going to care much about his motives.
In the meantime, Cuban has posted a short response on his personal blog, BlogMaverick:
I wish I could say more, but I will have to leave it to this, and let the judicial process do its job.
November 17, 2008
RE: SEC Civil Action in the United States District
for the Northern District of Texas, Dallas Division
Mark Cuban today responded to a civil complaint filed by the United States Securities and Exchange Commission in the United States District for the Northern District of Texas, Dallas Division. In its complaint, the Commission charges that Mr. Cuban engaged in violations of the federal securities laws in connection with transactions in the securities of Mamma.com Inc.
This matter, which has been pending before the Commission for nearly two years, has no merit and is a product of gross abuse of prosecutorial discretion. Mr. Cuban intends to contest the allegations and to demonstrate that the Commission’s claims are infected by the misconduct of the staff of its Enforcement Division.
Mr. Cuban stated, “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.”
Good luck Mark, I hope things work out for you, but just in case you may want to give Martha Stewart a call and get a recipe for some kick ass hooch.
This $700 billion bailout is already starting to sound like a golden parachute to me. Something we were promised it would not be.
This was sent in to the NYT 
It seems that the 
