Mamma.com Earns Mark Cuban Insider Trading Charges

Insider trading is the "trading of a corporation's stock or other securities (e.g. bonds or stock options) by individuals with potential access to non-public information about the company." In this case, Mark Cuban is accused of using such knowledge to avoid $750,000 in losses from a Mamma.com stock drop.

You might ask, what the heck is Mamma.com? After all, Mamma.com is no Google, right? Well, I've used Mamma.com before (I'll be honest; I tried it and discarded it).

Well, Mamma.com calls itself "The Mother of All Search Engines." It lets you search the Web, Videos, Jobs, Shop, Yellow Pages, White Pages. Problem is, if your name isn't Google, Yahoo, or Microsoft you're pretty much out in the cold nowadays.

While Mamma.com's interface is pretty uncluttered, that doesn't apparently grab enough users to prevent losses.

In December 2005, Mamma.com merged with Copernic Technologies, which also offers search software and online advertising services. It not trades under the ticker symbol CNIC.

According to comScore, in one year it dropped from 2 million unique visits (Sept. 07) to 669,000 unique visits (Sep. 08). That's a 66% drop.

In March of 2004 Cuban blogged (and bragged) about his Mamma.com investment.

Everyone wanted to know why. Why this stock. Particularly when I usually am opposed to investing in any non dividend paying stocks at all. At some point I will write a book, ok maybe not a book, but definitely a couple blogagraphs on why I think the stock market is closer to a Ponzi Scheme or chain letter than it is an efficient market. But not today.

I invested in mamma.com for the same reason I invested in Netidentity.com back when it was known as mailbank.com. I love businesses with low overhead, that don’t need to be technology leaders to succeed, that generate cash that they can put in the bank, and at some point, hopefully payout to shareholders. I think mamma.com has that potential.

Well, apparently not. In March of 2005 he blogged that he had sold it, and pretty much dissed the stock.

The SEC complaint Mark Cuban avoided losses in excess of $750,000 by selling 600,000 shares he owned after learning that Mamma.com was going to have a new stock offering. This would have diluted the value of any existing shares.

According to the Dallas News:

Mr. Cuban liquidated his position on June 28 and June 29, before Mamma.com announced its new, private offering, the complaint says. On June 30, trading in Mamma.com opened at $11.89, down 9.3 percent from the June 29 closing price of $13.105.

I'm sure you can do the math in the case.

You would think a billionaire would laugh at a $750K loss, but apparently not.

Whoa, mamma(.com).