Cuban Indicted Sued By S.E.C.

WSJ: SEC charges Dallas Mavericks owner and Internet entrepreneur Mark Cuban with insider trading related to sales of Mamma.com, now known as Copernic.

The Securities and Exchange Commission filed insider trading charges against Mark Cuban, the outspoken owner of the Dallas Mavericks, for allegedly dumping shares in Mamma.com upon learning it was raising money in a private offering.

The SEC alleges in a civil action that Mr. Cuban sold his entire 6% ownership stake on June 28, 2004, after learning that Mamma.com was raising money through a private investment in a public entity, or PIPE. The next day, on June 29, the company announced the PIPE financing and shares of the company dropped by more than 10%. By selling his stake, the SEC alleges, Mr. Cuban avoided more than $750,000 in losses.

In a PIPE transaction new shares are issued at a discount to the current trading price. An announcement of a PIPE transaction is often followed by a drop in the stock price as shareholders anticipate their stake will be diluted.

I always like Cuban . . . Got out at the top, dumping his Yahoo shares. This is an incidental amount of money to him, and I am surprised that he — as an insider — would do something this Martha-like.  Seems foolish, but let’s see if there is any sort of an explanation.

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Sources:
Video

Mavericks’ Cuban Sued by SEC for 2004 Insider Trading
David Scheer
Bloomberg, Nov. 17 2008
http://www.bloomberg.com/apps/news?pid=20601087&sid=aKfv8UKVEc_4&

SEC Indictment

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