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Talk of the Bay

Mavericks' owner fires salvo, wings Utek

By KRIS HUNDLEY
Published August 28, 2006

Billionaire Dallas Mavericks owner Mark Cuban isn't limiting his trash talk to the basketball court anymore.

Cuban is skewering publicly traded companies through his new Web site, www.sharesleuth.com. And, in an unusual (and some might say unethical) twist, he's proudly taking a short position in the stocks of companies he's criticizing, betting that they will decline.

Sharesleuth's first target, Xethanol Corp., came in for a full-body search in an Aug. 7 article written by editor and president Christopher Carey, a veteran business reporter formerly with the St. Louis Post-Dispatch.

Xethanol, which has promoted itself as a company that can make ethanol out of wood chips, corn stalks and paper sludge, was slammed for having a chief executive with a questionable resume, a "production plant" with no utilities, and several large shareholders that have been disciplined by the Securities and Exchange Commission.

Xethanol initially responded that Sharesleuth's report was full of "egregious" misinformation, then it replaced its chief executive.

After Sharesleuth's story, Xethanol's shares dropped more than 25 percent.

The bad publicity also had some impact on Tampa's Utek Corp., which sold several technologies to Xethanol over the past two years in exchange for 1.34-million shares of the company's stock.

Utek's shares have declined more than 10 percent since the story's publication.

Sharesleuth's story disclosed that Cuban had shorted 10,000 shares of Xethanol's stock prior to publication of the article. He also sold short about 25,000 shares of Utek, borrowing shares with the expectation of being able to buy them back when the stock falls.

Carey, the article's author, said he does not own shares of any company he is researching.

In an afterword to Carey's lengthy expose on Xethanol, Cuban defended his investment, which could well profit from the negative publicity.

"My personal preference is that you not take any investment action based on the information in this report," Cuban wrote. "We are not trying to move the price of the stock."

But a little profit couldn't hurt.

[Last modified August 28, 2006, 07:23:05]