SEC Charges Us Investor Mark Cuban With Insider Dealing
The US authorities are investigating the entrepreneur's disposal of 600,000 Mamma.com shares prior to a stock offering
American internet entrepreneur Mark Cuban, said to be worth close to $3bn, has been charged with insider dealing by the Securities and Exchange Commission.
Cuban, who owns the NBA basketball team the Dallas Mavericks, has been accused of selling 600,000 shares in the internet search engine Mamma.com after learning privately that the business was planning a stock offering. The SEC said that by disposing of the shares ahead of a public announcement, he avoided paper losses of $750,000.
Cuban, 50, was a co-founder of Broadcast.com, an audio and video streaming business that started out focused on basketball games, and was a star of the first internet boom. At the peak of the market in April 1999, he and his partners sold it to Yahoo for $5.7bn.
Cuban remains a celebrity in the United States, even appearing on Dancing with the Stars on ABC.
He is now chairman and a co-founder of HDNet, a home shopping channel in the United States, as well as being an investor in a clutch of technology firms; a co-owner of Magnolia Pictures, the film studio behind releases including Man on a Wire and Redacted; and owner of the US arthouse cinema chain Landmark Theatres.
According to the complaint filed by the SEC, Mamma.com invited Cuban to participate in the stock offering in June 2004, after he agreed to keep the information confidential. The offering was a private placement at a discount to the share price at the time and would have been dilutive to existing investors. Cuban was then the biggest shareholder with a stake of around 6.3%.
The SEC alleges that within hours of receiving the information, Cuban called his broker and told him to sell his entire stake. When the stock offering was later announced, the Mamma.com share price fell more than 9%.
Scott Friedstad, deputy director of the SEC's enforcement division, said it was "fundamentally unfair for someone to use access to nonpublic information to improperly gain an edge in the market."
The SEC hopes to impose a fine and disgorgement of the losses Cuban avoided by selling the shares. Lawyers for Cuban could not immediately be reached for comment.
According to the SEC, Cuban became angry when the Mamma.com chief executive told him over the phone of the plan to issue further shares, because the plan would be dilutive. But at the end of the call, Cuban is alleged to have said; "Well, now I'm screwed. I can't sell." The complaint includes several internal e-mails referring to the conversation with Cuban, one of which said he "flew off the handle" as anticipated.
Mamma.com, based in Montreal, last year changed its name to Copernic and is quoted on the Nasdaq exchange in the US.
Cuban, who owns the NBA basketball team the Dallas Mavericks, has been accused of selling 600,000 shares in the internet search engine Mamma.com after learning privately that the business was planning a stock offering. The SEC said that by disposing of the shares ahead of a public announcement, he avoided paper losses of $750,000.
Cuban, 50, was a co-founder of Broadcast.com, an audio and video streaming business that started out focused on basketball games, and was a star of the first internet boom. At the peak of the market in April 1999, he and his partners sold it to Yahoo for $5.7bn.
Cuban remains a celebrity in the United States, even appearing on Dancing with the Stars on ABC.
He is now chairman and a co-founder of HDNet, a home shopping channel in the United States, as well as being an investor in a clutch of technology firms; a co-owner of Magnolia Pictures, the film studio behind releases including Man on a Wire and Redacted; and owner of the US arthouse cinema chain Landmark Theatres.
According to the complaint filed by the SEC, Mamma.com invited Cuban to participate in the stock offering in June 2004, after he agreed to keep the information confidential. The offering was a private placement at a discount to the share price at the time and would have been dilutive to existing investors. Cuban was then the biggest shareholder with a stake of around 6.3%.
The SEC alleges that within hours of receiving the information, Cuban called his broker and told him to sell his entire stake. When the stock offering was later announced, the Mamma.com share price fell more than 9%.
Scott Friedstad, deputy director of the SEC's enforcement division, said it was "fundamentally unfair for someone to use access to nonpublic information to improperly gain an edge in the market."
The SEC hopes to impose a fine and disgorgement of the losses Cuban avoided by selling the shares. Lawyers for Cuban could not immediately be reached for comment.
According to the SEC, Cuban became angry when the Mamma.com chief executive told him over the phone of the plan to issue further shares, because the plan would be dilutive. But at the end of the call, Cuban is alleged to have said; "Well, now I'm screwed. I can't sell." The complaint includes several internal e-mails referring to the conversation with Cuban, one of which said he "flew off the handle" as anticipated.
Mamma.com, based in Montreal, last year changed its name to Copernic and is quoted on the Nasdaq exchange in the US.
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