The Mark Cuban firefight has turned into a cause celebre, and investors who have had enough of bailout chatter and perpetually red screens are lining up behind Cuban.
The dispute between him and the SEC essentially centers on whether he was brought “over the wall” and thus barred from acting on the news of a pending PIPE transaction until it was completed.
Keep in mind it is a civil case, the SEC wants Cuban to to pay a fine, not lock him up. They clearly had reached an impasse in previous negotiations, and here we are.
Cuban is supposedly a “sophisticated investor” and certainly accredited. And I would assume he knows the basics of securities law given his background.
His 8-minute conversation with the CEO took place right before he began his stock sales, and I doubt they were discussing the weather. Cuban knew the PIPE transaction would cause his investment to go down in value, and went ahead with his sales despite being “restricted”. He might not like the laws, but should probably live with them like the rest of us. And maybe be more careful about who he gets in bed with.
Mamma.com was far from blue chip. After putting up a relatively benign post on the company in the fall of 2006 the SEC was crawling my website, leading me to resist further temptation to comment on what I thought was a stock rife with highly promotional activity and dubious characters
And now Cuban is insinuating that Mamma.com threw him under the bus to get the SEC to terminate a multi-year investigation:
The SEC knows their case centers on one telephone conversation between two individuals- 4 years ago. The SEC claims there was an agreement between these parties to the conversation to keep certain information confidential. We interviewed Guy Faure, the former CEO of Mamma.com Inc., with whom the SEC claims Mr. Cuban made an agreement. We had a court reporter transcribe the interview. There was no agreement to keep information confidential. Here is a relevant excerpt from the interview with Mr. Faure:
CHRISTOPHER CLARK :
1) Q- We spoke earlier about you were telling Mr. Cuban in words or substance : “I have confidential information for you”.
A- Right.
2) Q- Do you recall anything Mr. Cuban said in response or reply to that statement by you ?
A- No, I do not.
The SEC knows this-they have the transcript, yet they brought the case anyway. Why? Do they have a different statement from Mr. Faure ?
Why did the SEC end their multi-year investigation of Mamma.com Inc. for alleged securities laws violations days before interviewing present and former Mamma.com Inc. executives about this matter? Was the timing a coincidence? We think not.
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Cuban seem to have most of America behind him, no surprise given the current environment in the country.
But now the story seems to be a case of he said, she said, but at least we have one winner-- blogs who need page views as we come into the slower traffic holiday season.
Although I do have to ask...why the hell did Citadel Investment Group own 282,161 shares of this stock in the third quarter of 2006?
That might be the most unlikely part of the company’s sordid past.
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Comments:
you’re post are always on! I have to wonder why the CEO had to tell Cuban the day before the PIPE. I have been involved with more than few and the underwriter/mgts normally decides the potential buyers. There is also a private prospectus/deal letter that must be signed by the target audience, since Cuban was party to neither, and apparently not informed before the Road Show, I don’t see him really being brought over the wall, unless I think they had no book, and sought to preclude him from selling on the deal, and thus breaking deal price. What do you think?
Posted by on 11/18/2008 at 08:37 PM
When Mamma’s CEO stated he had confidential information Cuban could have declined to hear it.
He would not have been locked in at that point, and would have been free to sell the stock.
He knew this was a risky investment, but his dabbles in it were not all that material to his net worth.
He did what he did; he has always been like that I suppose. But operating in the regulated securities markets, and interacting with bankers and management teams are different than firing off a blog post.
He should pay the fine and move on, but clearly sees this differently. Claiming he does not like PIPEs rings hollow-of course he does not, given the short term impact on the underlying stock. But he should have thought about that before he bought it in the first place-did he not think they had to raise capital after performning his due dilly?
I could see him being upset if he looked at the projections, asked management about future financings, and was told no PIPE would ever be done.
In any case this is all very silly, too bad we cannot string up the high level execs at AIG Financial Products who supervised a 300 person dept that caused so much damage.
Bottom line is Mark is a hothead, but needs to play within the rules. No wonder the MLB is cool to him.
SJ
Posted by on 11/19/2008 at 02:14 AM
Well, Mark Cuban dared take on the powers that be by bankrolling anti-war movies and the “Loose Change” guys. In this political climate, that, in itself, is enough to have these police state goons in this government go after a person.
This is a political hit, nothing more. Sort of like the Martha Stewart thing.
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