Mark Cuban – Insider Trader?
Mark Cuban has been accused of being a lot of things, including egotistical, aggressive, smart, etc. But an insider trader?
Back in 2004, Cuban bought a stake in Mamma.com (an online search engine). He purchased about 6% of the company and proceeded to dump those shares after learning of a dilutive offering that was in the works.
The details of the case (according to Wikipedia.com) are as follows.
On November 17, 2008, it was announced that the U.S. Securities and Exchange Commission (SEC) filed a civil suit against Mark Cuban relating to alleged insider trading in the shares of Mamma.com, now known as Copernic Inc.[83] A stock dilution occurred shortly after the June 2004 trade, which gave off red flags of inside knowledge at the time of the trade, which is alleged to have saved Cuban from a loss of $750,000.[84] The SEC claims Cuban ordered the sale of his holdings in Mamma.com after he was approached by the company on a confidential basis to participate in a transaction likely to be dilutive of current shareholders. Cuban disputes the charges, saying he had not agreed to keep the information secret.[85]On his blog, Cuban contended the facts were false and that the investigation was “a product of gross abuse of prosecutorial discretion.”
Cuban’s lawyers are taking an interesting route. This is a route that probably has little chance to succeed. In fact, the implications should they have success are far reaching. So far reaching, that my hunch is that the SEC will settle should it appear that they might lose the case.
In a nutshell, the lawyers are claiming the Cuban was not an “Insider” and was not subject to the restrictions that an insider would. How many times have we heard of a case where an individual learns of a company action and shares the news with his/her family and stripper girlfriend. The person sharing the information, and the people trading on that information are generally found to have committed insider trading.
Mark Cuban
In Cuban’s case, they are making the following argument.
Cuban and his legal team, while not admitting that the facts detailed in the suit are true, say the government’s premise is wrong. They say Cuban, whose shares represented a 6.3 percent stake in Mamma.com, was never an “insider” because he didn’t have a fiduciary or similar duty in his relationship with the company.
Interesting. Good luck with that.
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