SEC Charges Mark Cuban with Insider Trading

The Wall Street Journal reports reports that the Securities and Exchange Commission filed insider trading charges against billionaire and Dallas Mavericks owner Mark Cuban. Cuban is charged with allegedly selling shares in Mamma.com after learning the company was raising money in a private offering.

The compliant alleges that Cuban sold his entire 6% ownership stake in Mamma.com on June 28, 2004 after learning that the company was raising money through a private investment in a public entity, known as a PIPE. In a PIPE transaction new shares are issued at a discount to the current trading price. Often, the price of stocks will drop following a PIPE announcement because shareholders anticipate their stake will be diluted. On June 29, 2004, Mamma.com announced its PIPE financing and its shares dropped by more than 10%. By selling his shares the day prior to the announcement, Cuban avoided more than $750,000 in losses.

(Photo: Mark Cuban provided by the AP)