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Business Organizations Keyed to Chasalow, 3rd Ed.
Securities and Exchange Commission v. Cuban
Citation:
620 F.3d 551 (2010)Facts
In March 2004, Mark Cuban acquired a 6.3% stake in Mamma.com, a Canadian search engine company. In June 2004, Mamma.com decided to raise capital through a PIPE offering. The CEO contacted Cuban about the offering, prefacing the conversation by telling Cuban that he had confidential information to convey and ensuring Cuban understood he would have to keep the information confidential. Cuban agreed to keep the information confidential. After learning about the PIPE offering, Cuban became upset and stated, “Well, now I’m screwed. I can’t sell.” Cuban then requested and received additional confidential details about the PIPE, including that it was being sold at a discount to the market price. Immediately after receiving this information, Cuban called his broker and instructed him to sell his entire stake in the company. Cuban sold his shares before Mamma.com publicly announced the PIPE offering. After the announcement, Mamma.com’s stock price fell significantly, and by selling when he did, Cuban avoided over $750,000 in losses.
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