Stock plummets, Cuban cashes in after story
Cory Bergman October 27th, 2006
Mark Cuban is financing a web startup called ShareSleuth.com that aims to expose the wrongdoings of corporations through investigative reporting. Earlier this week, the site published a story on Tampa-based UTEK and the company’s stock plummeted 36 percent. Then there’s this little nugget — a disclosure at the end of the story, written by publisher Christopher Carey: “Mark Cuban, the majority member of Sharesleuth.com LLC… has sold short 75,000 shares of UTEK’s stock at an average price of around $20 a share.” UTEK closed at $12.15 on Thursday. As the site explains, “In certain instances, the majority partner of Sharesleuth.com is going to make personal investments based on information we uncover. Those investments will be fully disclosed, so that readers can evaluate any potential conflicts of interest.” Potential?
19 Comments Add your own
1. Troy | October 27th, 2006 at 11:42 am
Um…. not sure the FTC will see that the same way as Mark does, you can’t short a stock buy in same room you affect the value - some one is not going to be happy with this.
2. Corey Spring | October 27th, 2006 at 11:56 am
Yeah it created quite a little brouhaha in August when they published the first piece on a company called Xethanol - you can read that report and what happened after it under the ‘recent posts’ on the home page.
I don’t it seems like there would be an ethical issue, but at the same time, I don’t know how it can be illegal when they are throwing facts out there, it’s not like they are making stuff up about the companies they investigate.
3. Safran | October 27th, 2006 at 1:01 pm
I am completely fascinated by the whole concept. It’s a whole new ethical debate and I can’t wait to see how it plays out. No newsroom would allow this. And no finance company would. So a guy doing news AND finance doing something both sides would consider unethical? Gotta love that Cuban. He certainly likes to push boundaries.
4. Frank Catalano | October 27th, 2006 at 3:54 pm
Looking at it another way: Let’s say I do research on whether I should invest in a company. I decide to publish the research. At the same time, if my conclusion is bad I short the stock, and if it’s good, I buy a boatload. I tell everyone that’s what I’m doing.
This strikes me as due diligence under the label of “investigative reporting.” Sure hope all the facts uncovered really are facts.
5. Howard Owens | October 27th, 2006 at 4:10 pm
Wasn’t there an issue a few years back where stock manipulators were using Yahoo! forums to drive up share prices? Maybe in that case, the weren’t always publishing factual information so much as hype and rumor, but the effect was the same and some went to jail.
Cuban’s system is ripe for abuse. I can see/hear the justification — “we’re just reporting facts, and once the facts are uncovered, I’m taking advantage of that knowledge for profit. It’s not like I’m creating the facts.” That can be abused in so many ways.
And it’s not the same as some individual investor uncovering something and telling a few people and acting on it. This is Mark Cuban, Mark Friggin’ Cuban, through a well publicized site, gaming the system.
At some level, it’s just wrong.
6. Cory | October 27th, 2006 at 5:46 pm
Once key question left unanswered is -when- does Cuban find out about the story? Does he get a heads-up before it’s published?
7. MSM | October 28th, 2006 at 7:17 am
Welcome to the another trend in “citizen journalism” — in which a wealthy citizen buys his own megaphone and uses it according to his own dubious code of journalistic content. No “mainstream media” institution would tolerate this for a second. But going forward, we know that Mr. Cuban’s team will investigate corrupt corporations not because the public needs to know, but because Mark needs to make a killing.
8. discreet_chaos | October 29th, 2006 at 4:38 pm
Cory; If I remember correctly from the “brouhaha in August” and my research at the time, Cuban and the site makes no secret of the fact that he gets an advanced heads-up and this has actually been the subject of discussion. After all, as Howard noted earlier; “Mark Friggin’ Cuban” and because of his position and “inside knowledge”, he’s practically guaranteed a profit.
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