Posts Tagged Mark Cuban

Mark Cuban Sells Facebook Stake; ‘It was Gambling Money’ – MarketBeat – WSJ

Posted by Michael B. Calyn in Facebook, Wall Street on July 1, 2012


 

Mark Cuban Sells Facebook Stake; ‘It was Gambling Money’

By Steven Russolillo

Mark Cuban

Mark Cuban’s foray into Facebook didn’t last long.

The billionaire investor and Dallas Mavs owner sold his stake in the social network, less than a month after initially disclosing he had built a position in the company following its bungled initial public offering.

“I took my hit, my thesis was wrong,” Cuban said in a CNBC interview. “I thought we’d get a quick bounce just with some excitement about the stock. I was wrong, and when you’re wrong you don’t wait, you just get out. I took a beating and left.”

Late last month, Cuban disclosed on his blog that he had snatched up 150,000 shares of Facebook in three separate purchases. He said he bought 50,000 shares at $33, another 50,000 at $31.97 and 50,000 at $32.50. All three investments are currently underwater. Facebook today is up 4.2% at $31.26, but still down about 18% from its $38 IPO price.

At the time, Cuban described the move as “a trade, not an investment” and compared it to trading baseball cards.

“It was gambling money, to be honest with you,” he said on Monday. “Any time you try to time the market, you get what you deserve. Sometimes you’re right. Sometimes you’re wrong. This time I was wrong.”

Facebook’s trading debut last month was marred by technical glitches on the Nasdaq Stock Market, which left many investors confused over whether their orders to buy and sell shares had been fulfilled. The stock’s steep decline over its first month of trading left it as the worst-performing IPO of $1 billion or more for a U.S.-based company, according to Dealogic.

Cuban says much of the decline is due to basic supply and demand issues. Days before pricing the IPO, Facebook boosted the size of the deal to 421 million shares.

By comparison, LinkedIn issued only 8.4 million shares when it debuted last year. The stock more than doubled durings its first day of trading. ”If Facebook did the same, the stock would be at about $200 right now,” Cuban says.

Cuban also had strong words about the role of high frequency trading in today’s market.

“High-frequency trading has zero place in the market,” he said. “They should get rid of it altogether because it’s an unquantifiable risk that can impact the market in ways that we can’t even define.”

 Mark Cuban Sells Facebook Stake; ‘It was Gambling Money’ – MarketBeat – WSJ.

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Mark Cuban: High-Frequency Traders Are the Ultimate Hackers – MarketBeat – WSJ

Posted by Michael B. Calyn in Wall Street on June 26, 2012


MarketBeat

WSJ.com’s inside look at the markets

Mark Cuban: High-Frequency Traders Are the Ultimate Hackers

By Scott Patterson

Mark Cuban is best-known for his success as a businessman and pro basketball owner. But in the past few years, he has also gained a reputation as one of the most prolific critics of high-speed computer trading.

Bloomberg News

Cuban has been following the market for years — and has had a few run-ins with regulators along the way — but only after the flash crash of May 6, 2010, when glitches in computer trading systems helped trigger a heart-wrenching decline in stocks, did he start to worry that something was amiss. Cuban, who made his fortune in the technology industry, says he was concerned by how prominent of a role computer trading had taken in today’s markets. Having seen how technology can easily malfunction, he worried that the market was far more fragile than many realized. He also questioned whether high-frequency traders, which send waves of buy and sell orders into the market, serve a useful purpose in the market.

Concerns about the impact of rapid-fire trading on the markets has ramped up of late, especially after technical glitches at Nasdaq fouled up Facebook’s trading debut. Last Wednesday, market honchos such as NYSE Euronext Chief Executive Duncan Niederauer were grilled by lawmakers in a hearing about the current state of the market. One clear message from the hearing was that a proliferation of computer trading and opaque markets has hurt investor confidence. Niederauer in his written testimony said a big factor in the waning confidence was that “an ever-increasing volume of trading in equities occurs in dark markets.”

The Wall Street Journal recently caught up with Mr. Cuban via email and asked for his views on the state of today’s stock market.

WSJ: When did you start becoming concerned that rapid-fire trading was a problem?

Mark Cuban: When the flash crash hit, that got me looking at algorithmic trading and the state of the market. I came to realize that the stock market no longer knew what business it was in. I wrote a blog that basically said that the markets for equities of all kinds had evolved to a platform for hackers.

That got me looking further into issue of high-frequency traders. They are the ultimate hackers. They’re running software programs that have one goal, and that’s to exploit the trading systems as early and often as possible. As someone who wrote software for eight years and who keeps up very closely with the technology world, that scared the hell out of me. The only certainty in the software world is that there is no such thing as bug-free software. When software programs are trying to outsmart other software programs and hack the world’s trading platforms, that is a recipe for disaster.

WSJ: The Facebook IPO is a recent example of software gone haywire. Is that a sign that things have gotten too complex? It’s certainly hurting investor confidence.

MC: And BATS couldn’t get their software right for their own IPO. Why? It should be easy. They’ve been doing IPOs in electronic markets for years. Why did it fail now? If they can’t get an IPO they completely control right, does anyone really think that the software that controls the hundreds of millions of human-free interactions a minute is really bug free and cannot fail?

How many times an hour are there failures across individual equities around the world because of software running algorithms battling each other for supremacy to make a profitable trade? We have no idea. It’s not a question of if or when we have meltdowns, it’s just a question of how big and where. It’s straight out of War Games. And that’s before we even get to the possibility of nefarious or sovereign hackers getting involved.

WSJ: What do you say to the argument that high-speed traders provide liquidity to markets and narrow spreads? The argument is that those benefits outweigh the negative side effects that you’re talking about. If the HFTs are pushed out of the market, they say, regular investors will wind up paying more to buy and sell stocks.

MC: That’s a bogus argument. By definition they can’t go into an equity unless there already is liquidity. To say they’re adding liquidity is like saying spitting in a thunderstorm is adding liquidity.

As far as narrowing spreads, that’s absolutely true, but in absolute terms what does it translate into? For the individual investor it might save them a quarter a month. So what? Relative to the risk that’s the worst tradeoff in the history of tradeoffs

And the argument is horrible for another reason. If you’re an investor you shouldn’t care if the spread widened by a penny, nickel dime or quarter. If you’re anything but a trader the change is of no impact to whether or not the company will be successful and create returns for investors. In fact, that anyone even considers this a valid argument is a red flag that the exchanges are more interested in traders than investors.

WSJ: What’s the solution? There have been some calls for a transaction tax recently for instance.

MC: Public companies need to figure out what business the exchanges are in. Is the market supposed to be a platform for companies to raise money for growth and to create liquidity and opportunity for shareholders as it has been in the past? Or is the stock market a laissez-faire platform that evolves however it evolves? The missing link in all the discussions is: What is the purpose of the stock market?

 Mark Cuban: High-Frequency Traders Are the Ultimate Hackers – MarketBeat – WSJ.

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