SEC alleges Mamma.com investor Mark Cuban sold on insider information prior to PIPE announcement

By Devika Patel

Knoxville, Tenn., Nov. 17 - Dallas Mavericks franchise owner Mark Cuban was named in a Securities and Exchange Commission charge alleging insider trading ahead of a PIPE offering by Mamma.com Inc.

The charge, which was filed in the U.S. District Court for the Northern District of Texas, maintains that Cuban violated the antifraud provisions of the federal securities laws by engaging in illegal insider trading in securities of the company, also known as Copernic Inc..

According to the complaint, in June 2004, Cuban sold his entire 600,000 share position in Mamma.com on the basis of material, non-public information concerning an impending PIPE offering by the company.

The complaint alleges that Cuban avoided losses in excess of $750,000 by selling his stock prior to the public announcement of the financing.

According to the complaint, Cuban was Mamma.com's largest known shareholder during the relevant time period.

On June 28, 2004, the complaint alleges, Mamma.com's then-chief executive officer - after securing Cuban's agreement to keep the information confidential - invited Cuban to invest in the offering. The complaint further alleges that Cuban knew that the offering would be conducted at a discount to the prevailing market price and that it would be dilutive to existing shareholders.

According to the complaint, later that day, Cuban called his broker and - in breach of his agreement to keep the information confidential - instructed him to sell out his entire position in the company.

That afternoon, and over the next day, June 29, the broker liquidated Cuban's entire share position.

After the markets closed on June 29, Mamma.com publicly announced the offering. The next day, the company's stock price opened at $11.89, down $1.215 or 9.3%, from the prior day's closing price of $13.105.

According to the complaint, Cuban thereby avoided losses in excess of $750,000 by selling on the basis of material, non-public information concerning the PIPE offering.

The complaint alleges that by engaging in illegal insider trading, Cuban violated antifraud provisions.

Based in Montreal, Copernic and Mamma.com provide search technology for both the Web and desktop space.

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