June 30, 2006

CASTRO CAN'T STOP THIS CUBAN FROM GETTING RICH(ER)!

Cuban Revolution: Short-Selling by Journalists (Larry E. Ribstein, 23 June 2006, TCS)

Maybe Mark Cuban will be consoled for his Mavs' loss in the NBA finals by his new media venture. As discussed in Business Week, Cuban's planning an online publication that will engage in investigative business journalism. The tricky part is that Cuban evidently plans to trade on the information the journal finds, before publication. Presumably this means that he will sell "short" the stocks the journal investigates, and then buy them after the revelations puncture the price.

Absolutely brilliant, Cuban has figured out an efficient way to police corporate fraud and make himself even more rich and famous. Who needs Sarbanes-Oxley when you can just pay the whistleblowers to roll-over?

Posted by Pepys at June 30, 2006 12:27 AM
Comments

You can say that again!

Posted by: GER at June 30, 2006 1:07 AM

Don't you make a maniac outta me!!!

Posted by: Pepys at June 30, 2006 1:12 AM

This was how things worked in the 19th century stock market. However, the journalist-shortsellers wrote plenty of false stories too, as false stories could be almost as profitable as true ones. Even when they were true, there was usually a journal in the other guy's pocket that could write contrary stories. So the insiders, who knew the truth, had great advantages in stock trading.

On the upside, this could be a good opportunity for Martha Stewart to find gainful employment if her Martha Stewart Living thing doesn't work out.

Posted by: pj at June 30, 2006 8:14 AM

Just buy an index fund. You'll beat most of the stock pickers.

Posted by: Casey Abell at June 30, 2006 11:29 AM

Over time.

Posted by: David Cohen at June 30, 2006 12:18 PM

Am I the only person who sees this as ethically dubious? Isn't the very structure biased toward bad news, real or not? What's to stop him from slanting the articles to make companies look as bad as possible, and profiting from the false impression?

In any case, if he goes ahead with this, he'll become as popular among business people as Bill Lerach.

Posted by: PapayaSF at June 30, 2006 6:43 PM
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