BetUS Proposition Odds – The People against Mark Cuban
Mark Cuban, who has been fined over $2 million by NBA commissioner David Stern, is embroiled in controversy again, and this time it’s off the court.
The Securities and Exchange Commission (SEC) has filed a suit against Cuban, the billionaire (adjusted for inflation?) internet entrepreneur and owner of the NBA’s Dallas Mavericks, alleging that Cuban of illegal insider trading because he used information that was “confidential” to sell his stake in an internet company before the stock price plummeted.
The company in question is Mamma.com (now known as Copernic). In 2004 Cuban bought a 6.3% share in the company. Not long afterward, responding to an email message from the CEO, he obtained information that Mamma.com was going to be issuing another offering, referred to as a “Private Investment in Public Equity,” or PIPE. The purpose was to raise more money for the company, but the effect was to dilute the value of the shares.
The CEO wanted to know if Cuban wanted to take part in the offering. Cuban instead dumped his shares of stock the next day. After the equity deal was announced, the stock went down 9% in one day and kept going down from there. Cuban got out ahead of time, at $13 a share. Later he stated on his blog that he was not interested in owning shares in a company that was going to be selling additional stock below the market price.
And so, four years later (and supposed after a two-year investigation) the SEC comes with its charges.
So what of it?
BetUS Sportsbook Odds – Will Mark Cuban be found Guilty?
Yes 1/5 (-500)
No 3/1 (+300)
The issue in question is whether Cuban was asked to keep the information from the CEO confidential, because if so, a “duty of trust or confidence” to the company existed by virtue of the sensitive nature of the info. The CEO who initiated the contact with Cuban says that he doesn’t remember any agreement of confidentiality attached to the conversation. But the SEC asserts otherwise, and claims to be in possession of evidence where Cuban acknowledges that he risked being in violation of SEC regulations if he dumped the shares. “Well now I’m screwed. I can’t sell,” is what he is alleged to have said.
To add to the drama, it is possible that this is malicious prosecution on the part of the SEC, a government agency. Jeffrey Norris, an investigative attorney for the SEC, made an email comment last year during the investigation about how irresponsible it was that one of Cuban’s companies, Magnolia Picture, was possibly getting involved with the distribution of a film that suggested the United States government may have been involved in the 9/11 attacks (something Cuban’s people deny, by the way).
Cuban has never had aspersions cast about him regarding any other stock deal. But he has mentioned that he would use one of his websites, Sharesleuth.com, as a vehicle to “expose” supposed stock scams, and that he would sell short in those companies and profit as a result of a decline in the shares that his own content might cause.
The fine points of the insider trading law are nebulous at best. It becomes a matter of one person’s word against another, when it comes down to it.
It’s nebulous enough that Cuban would spend a ton of money to fight it, on principle alone. And all the way up to the Supreme Court, if necessary. This is the kind of case that tests the law, because there is nothing cut and dried about it. And here they are encountering a guy who thinks nothing of flying in the face of the establishment, and in spending as much as it takes to extend that test to its limits.
