Mark Cuban Sued By SEC Again
The price for becoming a high profile billionaire Shark does have its privileges and certainly helps open doors in the business world. But unfortunately sometimes those same doors open up business opportunities you wish would just go away and never have to deal with again. After Mark Cuban sold Broadcast.com to Yahoo for $5.9 billion at the height of the Dot Com Boom, he accumulated a net worth most people on this earth could only dream about. But one thing would never change no matter how much money Mark is worth, and that's his Entrepreneurial Spirit that's still very much alive and proven on the Shark Tank Show in every episode he's ever been on.
So you just walk away with a few billion after selling a new company for this thing called the Internet, what do you do now? If you're a serial entrepreneur like Mark Cuban and just learned the financial potential of the Internet first hand, you of course go looking for new Internet start-ups with hopefully the same potential Broadcast.com had. One of many Internet companies Mark Cuban has invested in was a new search engine called Mamma.com which he held a 6% stake in the business valuing his shares at $7.9 million at that time.
Mamma.com Chief Executive Guy Fauré wanted to raise additional funds for the business with what's called a "private investment in public equity" which Cuban was not pleased about because it would delete his equity in the company. Mark was offered the opportunity to participate in this new private investment round but was not interested investing any more money in a company that was basically trying to screw him if he didn't invest more money into Mamma.com. Under no confidentiality agreement about this new private offering which Mark was completely against, Cuban finally had enough and began selling his share's in Mamma.com that very day.
When the "private investment in public equity (PIPE) went public in June 2004, Mamma's stock predictably fell 9.3% on the first day of trading. Mark Cuban was right, it was a crappy business decision that would lead to Mamma.com's stock collapse which he wanted no part of. Not only would his stock of been diluted if he held onto them, the stock's price collapse on the first day would of cost Mark an additional $750k.
SEC first sues Mark Cuban in 2008
Four years later the SEC brings a suit against Cuban for trading inside information on the Mamma.com stock stemming from a message found on a chat site. When Mark did sell his shares in Mamma.com, it was for $7.9 million which saved him $750k in losses according to the SEC. The Judge threw out the case before it went to trial, but was then overruled by an appeals court in 2009.
Now 9 years and hundreds of thousands of tax payer dollars later, the SEC is still after Mark Cuban for what amounts to a fraction of 1% of his total net worth. At this point even if they win the case, they will still lose for what its cost the taxpayer's for almost a decade trying to pin something on Mark. Cuban could have pulled out his checkbook several times along this unforgettable journey and made this problem go away a long time ago, but instead chose to fight believing he did nothing wrong.
If Mark Cuban does lose the case against the SEC, (which He won't IMO) this would open up a whole new meaning of "Insider Trading" for early investors in ALL new companies. If a company you invest in decides to dilute your shares value coming up with a questionable way to raise additional funds, then verbally offers you a piece of this new investment that you believe is a stupid business decision, is this enough to "force you" to hold onto shares in a company that's outright trying to screw you? According to the SEC, it just might be!
Had Mark signed a confidentiality agreement or if the PIPE investment was completely closed off from outside investors, the SEC would appear to have a strong case against Cuban. But the fact the PIPE investment was solicited to other investors including Mark with no mentions of a confidentially agreement, would appear to make this public knowledge "at that time", right?
Good Luck Mark, I'm sure you have better things to do than dealing with this decades old problem. It's good to see someone standing up for making the "right business decision" and not giving up in what you believe was the right decision from day one.
With our Country on the brink of going broke because of poor business decisions being made by our "business leaders", isn't it about time we got someone in there that "Knows How To Run A Successful Business" before its to late?