Mark Cuban Case Study

840 Words2 Pages

Mark Cuban: Insider Trading Project
By:
Deborah Lomas
Kyle Hoffmann
L203

IPFW
Professor: Kent Kaufmann
Introduction
Mark Cuban the owner of the Dallas Mavericks was born and raised in Pittsburgh, PA. From his early age you could tell Mark was a determined well rounded individual and when there was an opportunity he would not hesitate to act upon it. After he graduated with a business degree from Indiana University in 1981 he started a computer company which he then sold making him a millionaire. He was the co-founder of another major business and played a role in a few other major corporations. In 2008, the SEC accused him of insider trading. In general, insider trading laws forbid the trading of securities by individuals in the possession of material, nonpublic information who have a duty to an issuer, the issuer’s shareholders, or the source of the information. There are various theories of insider trading; the most common being the classical theory, the tipper/tippee theory, and the misappropriation theory. Mark Cuban was accused of misappropriation insider trading. The SEC purported that Cuban sold his 6.3% stake in the online company Mamma.com after learning from the Chief Executive Officer (CEO) that the company was going dilute the worth of its shares by offering stock. By trading his stock on this material information Mr. Cuban averted $750,000 in losses. After a five year battle between the SEC and Mr. Cuban and an initial reversal in the SEC’s favor the case went to trial and the verdict came out in favor of Mark Cuban. This paper will analyze and answer specific questions regarding this case.
Why didn’t the SEC accuse Mark Cuban of traditional insider trading considering he was the largest individual share...

... middle of paper ...

...mmitted illegal insider trading of Mamma.com stock, based on misappropriation theory?
One scenario where Mr. Cuban could have committed illegal insider trading could include if he had agreed not to trade before the Mr. Faure had given him the information. Mr. Cuban also could have committed illegal misappropriate illegal insider trading if it could have been established that he and Mr. Faure had a previous history of sharing confidential information. Another scenario could be if Mr. Faure’s lawyer overheard sensitive information that the company would be facing a lawsuit and due to this information he sells his stock in the company. In this scenario the lawyer has misappropriated the information for his personal benefit. The lawyer has a relationship of confidence with Mr. Faure and would reasonably be expected to be trusted with confidential information.

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