Tuesday, November 03, 2009

RIP, Sharesleuth Business Model

When Mark Cuban opened his Sharesleuth website three years ago, with a "business model" based on his trading in advance of Sharesleuth items, Cuban smugly heralded the site as the Next Big Thing in financial journalism in a series of arrogant blog posts.

It hasn't turned out that way, as is evident from the latest item. Today the site had an item on Michael J. Xirinachs, a "financier" enmeshed in the fraud involving naked shorting poster child Universal Express. As usual, Cuban hasn't taken a position in any of the stocks mentioned in the item.

That's significant because Cuban is supposed to be financing this site by doing just that. And he hasn't taken a position in any Sharesleuth stocks since this item on a Chinese company in March 2008.

Maybe the reason is his ongoing insider trading case. But I suspect that he hasn't been trading in advance of these items because he can't. There are a lot of good shorting opportunities available among microcaps, but very few of these stocks can be shorted.

In fact, I think it's pretty plain by now that the Sharesleuth business model is dead. Good riddance. It's failure was pretty obvious back in 2007, after it emerged that his trading wasn't the money machine he had anticipated.

This disclosure, if current, shows that Cuban has taken positions in a grand total of three companies, and that just two of his short positions are still pending.

Sharesleuth also has been pretty much of a flop from a journalistic standpoint, and not just because of the obvious ethical issues. It just has not been a particularly useful website. Sharesleuth's output has been sparse--he has embarked on full-scale "investigations" on a grand total of five companies in the past three years, and "short takes" on a few others. The items tend to be overlong and written in police-report fashion, with little context.

When he startd up Sharesleuth, Cuban said as follows in a blog post entitled "Business Journalists Should be Thankful":
If Sharesleuth is successful, you can bet that any of the above with billions of dollars at stake will gladly hire the best and brightest business journalists they can find.Bigger the rolodex, the better. Old is the new young. Crusty is the new Yuppy.They will unleash those journalists to uncover stories that can give them an edge.

That hasn't happened and you know what? I don't know of any investigative journalists who are too broken up about it.

© 2009 Gary Weiss. All rights reserved.

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