Has Mark Cuban Hedged His Facebook Position?
There are five (correct) answers to this question. They are (in no particular order):
a. who knows?First, let's take a look at Mark Cuban's current (disclosed) Facebook position---
b. he'd be stupid if he wasn't
c. Broadcast.com
d. Yep, he's gotta to be
e. Yes, his silence (no posts or tweets) on this means only one thing
(Long) 150,000 shares; average cost per share $32.49; total cost $4,873,500Based on a 6/1/12 FB close at $27.72, Cuban looks like he is sitting on a net (paper) loss of $715,500.
Do we begin to worry and feel sorry for Mark Cuban and his Facebook trade? No, because we only can see his paper loss. No, because he already told us this is a trade, not a long term investment. No, because with an original FB position of nearly $5 million, he has a vested interest in monitoring trade. No, because Mark Cuban doesn't like to lose money. No, because Mark Cuban isn't stupid.
Back in 1995 Mark Cuban and partner created Broadcast.com, a multimedia company. Years later they sold the company to Yahoo! for $5.7 billion in 1999. But, Cuban then owned restricted Yahoo! stock that was locked up. Cuban was at risk owning (temporarily) illiquid Yahoo stock. Cuban was at substantial risk. Cuban didn't want to accept that risk. Mark Cuban wanted to transfer that risk to the options market. So, Cuban says he "hedged my stock with synthetic indexes, in case the market cratered in the six months before I could hedge my actual Yahoo shares. It cost me $20 million, but I protected what I had." (Fast Company, September 30, 2002).
In January 2000, Cuban bought the Dallas Mavericks, NBA franchise.
In May 2012, Cuban bought a little under $5 million of Facebook stock.
Mark Cuban is hedged.
