Mark Cuban, Internet billionaire, Dallas Mavericks owner and Shark Tank star is in fighting form. Recently cleared of insider trading charges by the Securities and Exchange Commission, he is naming names in the government attacks leveled against him which a jury found baseless. I caught up with him to find out what happened and how he cleared his name. Our interview follows, edited for clarity and length.
Q: You have been cleared of all charges of insider trading, a stinging rebuke for the U.S. government. Can you tell us what happened?
A: The SEC took a flyer in 2006 on a case that had no foundation. As the evidence confirmed my position, that there was nothing even resembling insider trading, they refused to drop the case. So we had to spend seven years and a lot of money to get to a point where a jury took just a few hours, including lunch and coffee breaks, to confirm that the SEC did not have a case.
Q: The SEC initially said you used a private tip to avoid a loss on the sale of your 600,000 shares of Internet company Mamma.com shares back in 2004. How did they get this so wrong?
A: Confirmation bias. They ignored fact after fact. Even those written by SEC agents. Instead of dealing with facts, they misrepresented and mislabeled testimony and documentation and ignored the obvious.
Q: The news of a private placement had already leaked in the market so why would they target you specifically?
A: Remember, this dates back to 2006 when Linda Thomsen was head of SEC enforcement. This is just my opinion, but I really get the sense that she had no idea what she was doing. She was looking for a name to prosecute and I was the name she came upon. To give you a sense of timing, they announced the charges against me three weeks before Bernie Madoff was arrested. Maybe she knew Madoff was coming and she wanted something to divert attention from it? Maybe she was just desperate for a skin on the wall. I don't know. What was certain was that they wanted the b! iggest bang for their PR buck. Imagine how I felt to wake up the morning of Nov. 18, 2008, and turn on CNBC to find that I was the non-stop headline. It wasn't fun. It made me feel sick to my stomach.
So to answer your question, I can only guess. You have to ask Ms. Thomsen.
(Editor's note: Thomsen didn't respond to e-mails seeking comment.)
Q: Do you think it's that the SEC doesn't have the right resources and people overseeing business and the securities industry or are they just trying to make examples of high profile people?
A: I think they exemplify what type of organization you should expect when you have nothing but attorneys and in particular former prosecutors running the show. From every dealing and observation I have had of the SEC, it is obvious that lawyers run the show. There is a culture of trying to win, not trying to find justice. There is a culture of looking to find their next job. I always say that SEC equals "Swiftly Enhanced Careers." There is no business sense that I can find. That has, in my humble opinion, led to a bloated entity that has no idea what resources it needs, no concept of what its true goals should be or how to get there. They don't know how to make markets fairer or better at creating capital for business. They just know how to use the courts to litigate matters. (The SEC declined comment.)
Q You refused to settle and went to trial. You had to spend more money on lawyers than on the potential fines you would have had to pay. Why was this so important to take this to the mat.
A: Because I hate to be bullied. I love this country. The idea that the people who over the first six years of my case ran the SEC could just ignore facts and care only about winning and losing and have no interest in justice, turned my stomach. I have the resources to fight. I felt compelled to take up that fight.
Q: The SEC has been trying to be tougher on wrong doing to show the world they are not asleep at the wheel after missing things li! ke Bernie! Madoff. Are they targeting the wrong people?
A: It's not about who they target, it's the concept that PR solves the problem. The SEC tries to maximize the amount of press they can get. They have yet to prove, or my guess even research and evaluate whether or not there is any correlation between PR and safe markets and efficient capital formation. Despite this lack of knowledge, they keep on taking the same approach year after year. You know the definition of insanity.
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Q: You are also the owner of the Dallas Mavericks. Is this for profit or just for fun? How big of a business is owning a basketball team.
A: It's both. As far as size, it depends on how you value an NBA team. In my case the team isn't for sale, so the value really doesn't matter. The only value that really matters to me is the value I can bring to our customers. I want them to love every minute of a Mavs game, no matter how they consume it.
Q: You are also one of the stars of the show Shark Tank which features financiers analyzing and deciding whether to invest in new products presented by entrepreneurs. What's most important in deciding whether it not to put money into something? What are the important metrics you use to decide?
A: Sometimes you buy the horse, sometimes you invest in the jockey. It really comes down to the actual business and the upside. The ultimate scenario is a great entrepreneur with a business that is poised to explode. But every now and then I love to invest in a company that may not set the world on fire, but has the chance to establish itself, create jobs and have a positive impact.
Shark Tank is so unique in that we send the message every week that the American Dream is alive and well. We have entrepreneurs from all over the country, from every demographic, each with a company that any of our viewers could have created themselves. We s! end the m! essage that if our entrepreneurs can do it, so can you.
That is something I am proud to be part of. I can't tell you how many times people have told me the show has inspired them to start their own business or push themselves harder to make their business successful.
That is an amazing feeling for me and why I do the show.
Q: You were active in the '90s with several Internet companies, broadcast.com and others. Twitter went public and Facebook and Google are on fire again. Are we entering another Internet bubble?
A: I wouldn't call it a bubble. In a bubble any company that resembles a high flyer takes off as well. We aren't seeing Twitter or Facebook wannabes go public. We aren't seeing tiny social media companies go public and run up.
What are seeing instead is momentum investments that are driving stocks to new highs. That is not from being in a bubble; it's from the decline in the number of stocks available to investors. I think there are only 3,700 operating companies in the Wilshire 5000. There are fewer than half the number of public companies trading today than there were 15 years ago.
Which makes the point that more and more money is chasing fewer and fewer stocks. The law of supply and demand says that pushes up pricing until there is a better risk reward somewhere else, or something else like a flash crash/Nasdaq freeze destabilizes market confidence and causes money to be pulled from equities again.
And it will happen again. That is probably the only certainty there is in the stock markets.
Q: Are you an Investor in Twitter? What do you think if its prospects?
A: No. It's a great company. I think they did the right thing by limiting the number of shares they offered to the market. That pushed up the price, which puts them in a great position to do a secondary and not only raise more capital at a higher price, but also allows insider shares to be placed in the market in an orderly fashion.
All that said, I have not been chasing sto! cks here.! I have no idea how high they will go, twitter included. I tend to try to be patient, wait on the sidelines, be hedged and when whatever happens that will crush stocks, whenever it happens, I will be in great position to buy.
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