Mark Cuban vs the SEC

There's a really good breakdown of the SEC's case over at Professor Bainbridge's blog. He thinks they have a good case, but notes some possible strategies. The one question he has about the case was the one I had when I heard Cuban did this to save a measly $750,000.

Finally, WTF was he thinking? According to the SEC, Cuban saved a whopping $750,000. According to Wikipedia: “As of 2007, Cuban is #133 on Forbes’ “World’s Richest People” list, with a net worth of $2.8 billion.”

This wouldn’t be the first time greed made an iincredibly wealthy person do something stupid over what amounts, from their perspective to chump change. (Remember Martha Stewart, who saved $45,673 by selling her Imclone shares?)

But I really don’t understand the psychology in most of these cases. You’re rich. You can afford to take a hit.

In Cuban’s case, however, I suspect it was not greed but rather his legendary temper that did him in. The PIPE transaction Mamma.com planned would have involved the issuance of new shares at a below market price. It would have diluted the economic value and voting rights of Cuban and the other pre-PIPE investors. The complaint makes clear that Cuban was furious about the planned sale. His anger led him to a rash act, which now could result in serious civil fines. Whether the Justice Department will pursue criminal charges, as well, remains to be seen.