Dallas Entrepreneur to Blame
Self made Texas billionaire Mark Cuban was charged last week on counts of insider trading. Cuban has successfully invested in everything from computer software, consumer electronics, television, Internet services, and an art house movie theater chain, as well owning the Dallas Mavericks basketball team.
A little over four years ago, Cuban invested in a small Canadian search engine known as Mamma.com. As their biggest investor, he apparently kept close tabs on the company and discovered that it was preparing to go public, which would have devalued his own stock (acquired at deep discount).
Cuban, apparently only hours of learning about the proposed stock offering, dumped his 600,000 shares (totaling a 6.3% interest in the company) to avoid a potential $750,000 loss. This allegation has been pending for over two years, as the investigation has dragged on.
The SEC complaint accuses Cuban of insider trading, or using knowledge improperly to manipulate the stock market for personal gain. Two days after the shares were sold, the public entity, or PIPE financing was announced and the market share of Mamma.com plummeted more than 9%.
Cuban said of the company back in 2004, “I invested in mamma.com for the same reason I invested in Netidentity.com back when it was known as mailbank.com. 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. It’s not Google or Yahoo, nor will it be a top 5 search engine anytime soon. But it is a good metasearch tool that I use and have used. Google and Yahoo have become carbon copies of each other, and for me, other than usenet and news searches, it’s too big. I like the way Mamma.com organizes websearches, and I use it for picture searches.”
Later after he sold his stock, he mentioned in his blog, ” “I don’t want to own stock in companies that use this method of financing (the PIPE) … Because I don’t like the idea of selling … stock for less than the market price.”
More recently, the Texas tycoon stated, “”The government’s claims are false and they will be proven to be so.”
Cuban charges 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.”
Cuban’s attorney, Ralph Ferrara says the issue “has no merit and is a product of gross abuse of prosecutorial discretion,” and that Cuban will “demonstrate that the Commission’s claims are infected by the misconduct of the staff of its Enforcement Division.”
Tags: alternate search engine, mamma.com