My Take on Mark Cuban’s Latest Venture

In case you haven’t heard, billionaire entrepreneur and owner of the Dallas Mavericks, Mark Cuban, has caused quite the commotion by announcing his latest venture, The site, which will debut next month, will be a blog-style investigative reporting site that will focus on exposing corporate fraud. The site will be edited by Christopher Carey, a long time business reporter who recently quit his job at my hometown paper, the St. Louis Post-Dispatch.

Sounds pretty cool, right? Well, all was well and good until Cuban disclosed that not only does he plan on investing in the site, but he also will be taking investment positions based on what the investigations uncover. He plans on disclosing all of his investments, but will make the trades after the research has been done and before the site publishes its findings.

Given the controversial nature of most of what Cuban says and does, it’s not that surprising that many are outraged at this idea. However, let’s calm down and analyze exactly what is going on here. Then we can decide if what Cuban plans to do is illegal (it’s not) or perhaps unethical.

This company is going to investigate individual companies and the people behind them. If something fishy is uncovered, Cuban might make trades based on this information (presumably by shorting common stocks). Then the research will be published on and any positions Cuban has will be fully and properly disclosed.

Now some might be up in arms that Cuban will be in a position to short a company’s shares prior to his editor publishing the negative research to the public. Let’s think about this for a second. How is what Cuban plans to do any different than a hedge fund, pension fund, or mutual fund manager coming on CNBC and talking about what stocks he or she likes. The manager has previously conducted in-depth research, come to a conclusion, traded the stock, and come on the air to explain and disclose the position.

I really don’t see how will be any different than someone from Goldman Sachs recommending a stock on CNBC. In fact, investors should be happy that there will be a new place to find negative research on public companies. Most of the time everybody is telling you what investments to buy because they are in the business of selling investments.

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One Thought on “My Take on Mark Cuban’s Latest Venture

  1. Barry Ritholtz on June 24, 2006 at 7:42 AM said:

    If Cuban had said he’s setting up a private research company to uncover fraud, and would invest on his findings, no one would have cared much.

    If he then asked if he should blog on it, everyone would insist he did.

    Is it anyone’s position that he should establish, pay to fund the operations of it, and should release the research and analysis to the public — but not be allowed to invest until after everyone profits from at his expense and labor?

    I guess that means there’s no such thing as private anymore.

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