Thursday, August 10, 2006

Mark Cuban Responds!

Mark Cuban responded today to my criticism (here and here and etc.) of his trading-vehicle-reporting-website Sharesleuth. I think he was mad at me for reading him the riot act on CNBC yesterday (though, interestingly, he hid under his desk and declined to appear on air).

I read through his rambling, disjointed Patrick-Byrne-style rant a few times and still can't comprehend his point. He seems to be saying that "transparency" is the virtue of his website. I.e., he is upfront about using his site to front-run his reporters -- thereby profiteering in the same manner as sleazy penny stock newsletter publishers.

But after saying that he is transparent in his sleaziness, he takes a few shots at me and seems to say that I'm not transparent and that, in fact, nobody is transparent.

He also mischaracterizes the problem that I (and a lot of others) have with his scheme. He says I suggest that "what I am doing with Sharesleuth is not responsible journalism because I am trying to make a profit by trading on the information that we uncover.”

No, I am suggesting that was he is doing is not responsible journalism because he trades on his reporters' scoops before publication. As Andrew Sorkin pointed out in the New York Times Dealbook, that would be a hanging offense at any media outlet: "Having a direct financial stake in the articles published — especially investigative articles that tend to be negative — is about as basic an ethical violation as there can be, whether that stake is disclosed or not. "

He also.... now this is painful... accuses me of "pimping" my book. Good heavens! What an accusation. An author using a blog to promote a book! The scandal. He found me out. What a sharp guy. Definitely right up there with Cuban front-running his reporters.

Dealbook called Cuban's smoke-blowing re my blog "a labored attempt to equate his methods with the simple acts of advertising and promotion." I call it just plain goofy.

Think about it. If that trade in Xethanol works out for him, we'll be able to put a precise price tag on how much the reputation of financial journalism is worth, at least to one irresponsible billionaire: 10,000 shares times 12.65, or $126,500.

Lance Gay (a former longtime political reporter for Scripps-Howard), responded on Cuban's blog as follows:

"I'm not sure that I would have a problem with what you are doing if you made your investments upon publication where everyone would have a fair shot at the information you have gathered. But you acknowledge you bought short in May. Now through Sharesleuth, you appear to be trying to ensure you gain financially from the advance knowledge you obtained with an disparaging article.

"Journalism cannot work that way. We do not all have vested interests in what we write or choose to publish. I'm a rank innocent on the ethics of investing, and I don't have the necessary legal background to say whether or not what you are doing passes SEC security. But as a reporter I find what you have done is plain damn wrong."

Sorry, Lance. You're not talking in a language Cuban can understand.

XETHANOL REPONDS: In a response to the Sharesleuth article this afternoon, Xethanol, not surprisingly, used Cuban's trading against him:

"Xethanol questions the real purpose of this article, particularly in light of Mr. Cuban's professed intention to 'short the shares of this company.' Although we are not alleging that there has been any improper stock trading in this case, articles such as this provide fertile ground for such activities to occur."

I hate to say it, but I told you so.

Nope. Come to think of it, I don't hate to say that.

UPDATE: More from Mark Cuban and R. Foster Winans -- yup, that R. Foster Winans -- weighs in. Over at the Houston Chronicle, Loren Steffy is troubled by Sharesleuth even more than I am. He calls it a "tout sheet" to flog Cuban's short positions, and he quotes a law prof calling the enterprise "market manipulation."

© 2006 Gary Weiss. All rights reserved.

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Wall Street Versus America was published by Penguin USA on April 6.
Click here for its Amazon.com listing and here for more information on the book, from my web site.

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