Mark Cuban On Mutual Funds: “completely clueless”

by Corey Philip
September 23, 2016

If you’re not familiar with Mark Cuban, let me give you a briefing, he’s the billionaire investor on ABC’s hit tv show Sharktank, and owner of the Dallas Mavericks with a net worth of about $3 billion dollars.  According to he’s invested $19,850,000 in start ups over 85 deals (that sound like peanuts relative to his total net worth).  He made his fortune with a company called that he took public in the late 90s dotcom boom, and then sold out to Yahoo.  It’s fair to say, he’s a seen a thing or two on wall street.

Cuban reveals in a blog post about the process of taking his company,, public, that mutual funds and the people who run them aren’t as savvy as you would expect for being ‘wall streets finest’.  For those that are aware, index funds beat mutual funds about 60% of the time, over the course of 15 years — rarely justifying their fee’s.  Cubans reveals gives some humorous insight into why.

It starts with a roadshow.  Taking a company public starts with a, you heard it, ‘roadshow’.  That’s when the company executives travel around to all the mutual fund offices and pitch their company.  The roadshow is a big deal for the major shareholders and executives of the company going public as they are seeking a huge return on investment.  In Cuban’s own words, it was “the ultimate Get Loud” and a
“Stockapalooza”. Cuban, like all other exectives and founders, took this roadshow thing seriously and dilligently prepared for it as if he were pitching on Sharktank to some rather sharp investors.  He hired consultants, pondered about what verbiage to use, and had Morgan Stanly and other run them through question after question for so they wouldn’t “look stupid’ in front of savvy investors.

Savvy investors? I was shocked.

The joke was on Cuban.  The mutual fund guys weren’t nearly as savvy as expected.  Cuban says “The vast majority of people in the meetings had no clue who we were or what we did.”  It became such a such a joke among him and his business partner Todd that they would purposely mess up to see if anyone would notice.  Here’s Cuban’s own words on the circus act of Selling an IPO:

The lack of knowledge at the meetings got to be such a joke between Todd and I that we used to purposely mess up tosee if anyone noticed. Or we would have pet lines that we would make up to crack each other up. Did we ruin our chance for the IPO? Was our product so complicated that no one got it and as a result no one bought the stock? Hell no. They might not have had a clue, but that didn’t stop them from buying the stock. We batted 1.000. Every single investor we talked to placed the maximum order allowable for the stock.

The savvy guys on wall street, charging high fee’s for their investing expertise, are the same geniuses aimlessly buying into an IPO.  I can’t really conclude this any better than Mark Cuban himself:

The same mutual fund managers who were completely clueless about our company placed multimillion orders
for our stock. Multimillion dollar orders using YOUR MONEY.

About the author

Corey Philip

Corey Philip is a small business owner / investor with a focus on home service businesses.

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