IN some ways, Mark Cuban reminds me of Michael Bloomberg.

Both became wealthy by building companies based on smart ideas. Both used their wealth to change an industry — in Bloomberg's case, financial information; in Cuban's, the National Basketball Association.

They both tend to say what they think, and they don't care if people take offense.

Both wound up in the news business. Bloomberg started Bloomberg News, now one of the world's largest news organizations and where, in the interest of full disclosure, I worked for 12 years.

Cuban started HD Net, a high-definition television channel that produces news programming and recently hired defrocked CBS anchorman Dan Rather.

Cuban also is funding a Web site, Sharesleuth.com, to do investigative stories on companies. With his resources, Sharesleuth could provide information that would benefit investors worldwide.

But that's where he and Bloomberg differ.

Bloomberg learned early on that owning a news operation means setting aside personal agendas. To be credible, his news service might have to write tough stories about some of his biggest customers. Those customers might get angry and cancel their contracts for the financial data terminals that are his company's lifeblood.

Bloomberg, who's now mayor of New York, asked only that his reporters be painstaking in their accuracy.

Cuban has a different agenda. Using the information Sharesleuth uncovers, he buys or sells stock before the stories are published. His trades are fully disclosed, albeit after the fact.

This, he says, is a better "model" of news gathering because his site won't be supported by advertising.

Self-fulfilling prophecy

Nor will it be supported by much credibility.

This week, Sharesleuth produced its first "investigative" piece, a lengthy missive on a tiny company, Xethanol, that says it's developing the technology to make ethanol from corn husks and wood chips. Sharesleuth questions those development efforts as well as the background of several of the company's officers and investors.

Xethanol called the story "egregious" and said it contained "misinformation and disinformation."

The Sharesleuth report includes the disclosure that Cuban sold short 10,000 shares of Xethanol and 25,000 shares of a related company based on the information in the story. In other words, he made a bet the stock would fall, then published a report critical of the company.

According to the story, Cuban shorted the stock at about $12.65, the price it traded at in mid-May. The day Sharesleuth posted its story, Xethanol's shares fell 14 percent, to $5.95, although they'd been falling since June.

"What he's trying to do is manipulate the market," says Nancy Rapoport, a University of Houston law professor. "He's hoping the publication of that information will change the stock price."

Based on its first project, Sharesleuth is simply a tout sheet for short sellers. It exists primarily to make a billionaire basketball maven even richer.

What Cuban and Sharesleuth are doing is perfectly legal as long as what they write is true, a former Securities and Exchange Commission official says. Cuban isn't trading on inside information because the Xethanol story draws mostly from public records, he says.

The site, which employs one reporter, has hired an outside fact-checking firm to edit the stories.

"It's the order in which he's doing it that's the problem," Rapoport says.

On his blog Wednesday night, Cuban dismissed the controversy surrounding his venture and offered this defense: "Sharesleuth.com is what it is. It's paid for by my trading based on the information we uncover."

When he announced Sharesleuth, Cuban proclaimed it the advent of a new journalism model — one that wouldn't need advertising revenue for support and that would engage young readers.

Sharesleuth is as dull as a software manual. As a new recipe for journalism it lacks two ingredients: readability and credibility.

Profit first

In some ways, Cuban reminds me of Bloomberg, but not when it comes to journalism. Bloomberg became one of the first moguls of electronic news by emphasizing credibility over profit.

Cuban simply owns a Web site to flog his own investments. When announcing the venture, he used the headline "why journalism matters." If Sharesleuth is his answer, it's clear that what matters to Cuban has nothing to do with journalism.

Loren Steffy is the Chronicle's business columnist. His commentary appears Sundays, Wednesdays and Fridays. Contact him at loren.steffy@chron.com. His blog is at http://blogs.chron.com/lorensteffy/.

Comments

Readers are solely responsible for the content of the comments they post here. Comments are subject to the site's terms and conditions of use and do not necessarily reflect the opinion or approval of the Houston Chronicle. Readers whose comments violate the terms of use may have their comments removed or all of their content blocked from viewing by other users without notification.

• Most recommended comments
• Most recent comments