Monday, November 17, 2008

On Second Thought . . .

Major League Baseball just found itself a perfectly legitimate non-anti-competitive reason to keep Mark Cuban out of the club:
Federal regulators have charged Dallas Mavericks owner Mark Cuban with insider trading for allegedly using confidential information on a stock sale to avoid more than $750,000 in losses.

The Securities and Exchange Commission filed a civil lawsuit against Cuban on Monday in federal court in Dallas. The agency says that in June 2004, Cuban was invited to get in on the coming stock offering by Inc. after he agreed to keep the information private.

The SEC says Cuban knew the shares would be sold below the current market price, and a few hours after receiving the information, told his broker to sell all shares in the search engine company.
I think one hellacious lawsuit at a time is enough for anyone.

(thanks to Jason at IIATMS and reader Doug Christy for the near simultaneous heads up emails)

UPDATE: A couple friends of mine have already speculated that this smells like a smear job. I'd agree if this was simply a "sources say Cuban is in trouble with the SEC" kind of story, but this is an actually-filed lawsuit. It takes a while to put one of those together and to get the clearances to pull the trigger, and it's not like anyone in baseball has the kind of juice to get that ball rolling in order to squash Cuban.

Not that baseball is some mere bystander here. My guess: the bold talk from last week saying that Cuban-as-Cubs-owner will "never happen" came from someone who was privy to the investigation and imminent filing and thus felt pretty free to say something that, in the absence of this lawsuit, would be pretty reckless.


Jason @ IIATMS said...

To sell your stock the DAY BEFORE a company was going to issue stock under a PIPE (private investment in public equity) is just plain stupid.

The private investment is at a negotiated price. The PIPE can be offered to major shareholders or to new investors, who will likely gain preferential rights with the newly issued stock. Sometimes the new stock is convertible, super-voting, or other "things" which puts the rest of the common stockholders behind the new investors.

I'm guessing, even assuming, that Cuban had a look at the offering documents, making the sale that much more ill-advised.

Jason @ IIATMS said...

For a more finance-y view of this:

mooseinohio said...

Maybe he can stay in the Marthe Stewart Celebrity room?

Sometimes even smart people do dumb things and it appears Cuban may have fallen into that category.

Pete Toms said...

Looks like he's your garden variety billionaire after all.

Having said that, I'm always in the camp who thinks the real story is why some rich people get investigated and some don't.

That super wealthy people do crooked stuff is not a story.

As high profile as Cuban is, the politics behind this will come to light.

Are the Bud conspiracy theories circulating around the web yet?

I digress, but why would he write about this on his blog if he knew he was doing something crooked? In his mind, were his actions ethical?