2005 Mark Cuban Blog Posting on Mamma.com
In a March 2, 2005, blog posting, Dallas Mavericks owner Mark Cuban -- accused by the SEC today of insider trading -- talked about his investment into search engine Mamma.com, the company at the center of the SEC's charge.
The blog posting focuses on "naked" short-selling. Here's what Cuban wrote about his investment into Mamma.com:
"I wanted to reference Mamma.com. I had purchased stock in Mamma.com in hope that it could be an up and coming search engine. I thought I had done some level of due diligence. Talked to the company management. Talked to some employees who worked in sales. Read the SEC Filings. I knew that they had a checkered past and had been linked to stock promoter Irving Kott, and that their law firm still handled some of Kott's business, but the CEO, Chairman, lawyers all said that things were reformed and the company was focused on its business.
Then the company did a PIPE financing. I'm not going to discuss the good or bad of PIPE financing other than to say that to me its a huge red flag and I don't want to own stock in companies that use this method of financing.
Why? Because I don't like the idea of selling in a private placement, stock for less than the market price, and then to make matters worse, pushing the price lower with the issuance of warrants. So I sold the stock."
PIPE stands for "private investment in public equity." In such a sale, private investors are allowed to buy company stock at a discounted rate in exchange for getting their capital into the company quickly. No roadshow is required and there are fewer SEC regulatory issues.
(Thanks to WPNI's Ben Pershing for the heads-up on the Cuban blog archive.)
-- Frank Ahrens
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