Apparently Sharesleuth’s investigations take a very, very long time. The last article was published in August. And now at the end of September we have a follow-up. This kind of delay is probably a good thing, since the website employs just one reporter and aims at accurate, investigative articles uncovering corporate fraud and misdeeds. But just how is Sharesleuth picking its targets? Gary Weiss points to one possibility–Mark Cuban’s short portfolio.
When Mark Cuban’s Sharesleuth insider-trading vehicle performed a hatchet job on a little company called Xethanol in early August, Cuban disclosed some unfinished business: he had taken a short position in not just Xethanol, but also a company called UTEK, a Xethanol shareholder.
The UTEK short position was “underwater,” Cuban disclosed at the time.
Well, Sharesleuth’s second article has come out, and it is about a company called (surprise surprise) UTEK!
Mark Cuban’s Unfinished Business [GaryWeiss.com]
The critics of Sharesleuth keep piling on. And while we’ve spent a lot of bandwidth discussing the short-the-story aspect of Mark Cuban’s Shareseluth, we thought we’d pause for a moment to remind everyone that Chris Carey’s reporting was very, very good. Deep, thorough, balanced, objective. Almost heroic. It really is first-rate financial journalism. But don’t take our word for it. Check it out for yourself.
What’s more, the company’s board seems to agree, at least in part. Today they announced that CEO Christopher d’Arnaud-Taylor had been ousted.
We should also note something we didn’t pick up on until today. Apparently, the profits from pre-publication stock trading will not be used to fatten Cuban’s already bloated bank account. He plans to pour the profits back into the website and use them to fund additional investigative journalism. At the very least, this helps clear away any charges that Sharesleuth is simply a way to help out Cuban’s short portfolio.
Sorry if this all seems terribly earnest. We hate to get in the way of a good brawl.
A withering critique of Mark Cuban’s Sharesleuth is up over on Buzzmachine. The short version: Mark Cuban’s pre-publication trading creates a conflict-of-interest that undermines the credibility of the Sharesleuth enterprise. But you should read the whole thing to appreciate the full power of Jeff Jarvis’s arguments.
Jarvis also breaks some news, pointing out that Cuban will be the keynote speaker at the Online News Association’s conference. Jeff sounds like he’s looking forward to it.
I sure as hell hope there will be ample opportunity to discuss this and challenge Cuban at the Online News Association. Are they presenting him as some paragon of journalism? Some new kind of media mogul? Some opponent of journalism’s old ways? Or a circus act? I’m bringing popcorn.
Dumb money [BuzzMachine]
Cuban’s latest is already posted. Developing…
You dont know it yet, but Chris Carey and Sharesleuth broke new ground that will result in a “business journalists employment act”.
Hedge Funds, Private investors, Mutual Funds employ analysts by the boatload. They get paid quite nicely. Those analysts spend their waking and probably a good portion of their dreaming moments trying to figure out ways to get an edge that can improve their returns.
They hire or put on contract, experts, consultants, investigators, anyone who can help them outperform their peers.
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.
The process will be amazingly similar to what is happening with Sharesleuth. The jouralist will have more time and probably resources to go out and dig up the really good stuff than they did when they worked in traditional media. They will get to use all the investigative training and contacts they have acquired and accumulated over the years. Whatever skills they think they have, they will be get the enjoyable task of putting them to work. They will be given as many words, paragraphs or pages as it takes to convey the facts of their investigation.
Rather than turning in the story to an editor, it will go to an analyst, fund manager or investor.
For the record, we’re for full employment for business journalists.
Business Journalists should be thankful [Blog Maverick]
We’re not even sure if it’s really fair to call it round three, since Gary Weiss’s latest response to Mark Cuban’s Sharesleuth comes so fast on the heals of his earlier post. This post needs to be read in its entirety. Weiss actually calls up former Wall Street Journal reporter and convicted insider trader Foster Winans and gets him to comment on Sharesleuth.
My take on Cuban, off the cuff without doing much research, is that in a world of institutional thievery, hidden fees, undisclosed conflicts of interest, “legal” insider trading, engineered and misleading mutual fund returns, false and rigged analyst rankings, and all the other self-dealing behavior that is business-as-usual in the investment racket, Mark Cuban is by comparison a goddamned Mother Teresa. At least you know he’s screwing you.
Winans on Cuban: ‘At Least You Know He’s Screwing You’ [Gary-Weiss.com]
Well, that was quick. Gary Weiss is already responding to the Mark Cuban post we pointed you to this afternoon.
I read through his 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…. 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.
Seriously, since Cuban sidesteps the ethical issues here, which he apparently feels — or pretends — do not exist, there’s not much more I can say except to congratulate Cuban, yet again, for giving the enemies of financial journalism still more ammunition.
[Haven't had enough of Cuban and Weiss? A bit of background and analysis after the jump. Bonus: Another 'One Ocean View' reference.]
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Mark Cuban has come out swinging in defense of the maverick journalism website Sharesleuth. The wealthy entrepreneur came under fire when he announced he was not only sponsoring the site, which takes aim at corrupt business practices and mismanaged companies, but planned to make investment decisions based upon the as-yet-unpublished investigations of its reporter, veteran journalist Christopher Carey. Although this breaks with the traditional rules applicable to many business journalists—who are often prohibited from trading in any stocks they right about and sometimes from trading in any individual equities at all—Cuban argues that his way of doing things is no less damaging to Sharesleuth’s credibility than relying on corporate advertisers or pandering for increased audience share.
He also takes a shot at an unnamed former Business Week writer, who we can only assume is Gary Weiss, author of Wall Street Versus America:
One former BusinessWeek reporter suggests in his blog 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. All the while, he promotes his site to draw readers, possibly chooses blog posts that will generate the most readership and promotes his TV appearances as a means to pimp his books , which are for sale with HUGE graphics on every page of his blog.
There is absolutely nothing wrong with that. Nothing at all. The news, his news has to get paid for somehow, right? But is he a responsible journalist ? Is he a responsible publisher ? Do we even know ?
Doesnt the foundation of responsible journalism come from transparency ?
Tell us what the goals of your publication are so we can understand your motivation and use it as a filter when we read your blog. your newspaper. Watch your network.
Of course if he did that, he would be alone in the publishing universe.
Responsible Journalism [Blog Maverick]
So after we posted the item immediately below we realized we hadn’t even mentioned the target of ShareSleuth’s first article (and Cuban’s short selling)—Xethanol Corp. Here’s Chris Carey’s lead.
Xethanol Corp. bills itself as a biotechnology-driven ethanol company that can turn wood chips, corn stalks and paper sludge into cheap alternative fuel.
But a Sharesleuth.com investigation found no evidence that Xethanol has produced significant quantities of ethanol from those raw materials.
It’s not too surprising that there are scammers in the ethanol industry. As often pointed out by Tim Carney, the younger brother of DealBreaker editor John Carney and author of The Big Ripoff, the whole ethanol industry is something of a rip-off, profiting (when it does) from government mandates and subsidies. It sounds to us like this might have been part of the plan for Xethanol—to pump up its bottom line with government hand-outs. Chris Carey doesn’t focus on this angle but we’re assigning Tim to look into the matter further.
A further note: our neglecting to even mention the subject of ShareSleuth’s article in the intial piece may reflect poorly on our substantive focus. Or maybe it reflects the unusual structure of ShareSleuth—it’s easy to get distracted from the stories when you want to skip to the end to see how Mark Cuban made money on the story! We’re sure we’re not the only ones interested in how Mark Cuban is getting even wealthier!
So maybe this issue—distraction—is the major problem with ShareSleuth, rather than all those other high-sounding ideas like integrity and credibility.
Xethanol Corp. [Sharesleuth.com]
We’re been waiting for ShareSleuth’s first article to get posted ever since it was announced. The entire project appeals to us. And not just the do-gooder parts. Exposing fraud and corporate mismanagement is fine and all, if you go in for that sort of thing. But we have to admit we’re not-so-secretly attracted to the ‘greed is good’ aspect of Mark Cuban’s pre-publication trading on the stocks he’s writing about. We’re not sure if it’s legal. We’re not sure if it’s ethical. We’re not sure its good business journalism. We’re not sure if it’s even a good business plan.
But it’s certainly innovative, ballsy and at least Mark Cuban and Chris Carey are exposing alleged fraud and corporate misdeeds rather than exposing themselves to fourteen year olds!
Gary Weiss is somewhat more disapproving. But he’s probably a better person than we are. Today he goes through Cuban’s “I shorted this piece of crap” disclaimer attached to the end of Chris Carey’s first report.
Mark Cuban’s Excellent Trade
Can Mark Cuban really trade stocks based on advanced knowledge of stories that will be published on Sharesleuth.com, the blog he is funding that will focus on exposing corporate fraud?
Cuban says that he will use the information gathered by investigators for Sharesleuth to buy and sell stocks before the stories are published. Presumably he would seek to profit by short-selling stocks of companies where his investigators have uncovered wrong-doing, expecting the stock price to fall after the wrong-doing is exposed to the public.
But wait a minute! Isn’t that insider-trading or something? Can journalists trade on their stories in advance of publication?
DealBreaker’s exclusive analysis after the jump.
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