Mark Cuban was a hustler from a young age and his first experience with entrepreneurship was buying a lot of garbage bags from his dad’s friend for $3 a box and reselling them for $6 a box door to door. He had the world’s first and only door to door garbage bag subscription service. He was very successful with this and it was just his start.
While he was a college student in the 1980’s at Indiana University studying business administration, Mark Cuban was able to accumulate $15,000 and used it to buy a bar. He was successful at operating the bar and it became the most popular student bar in town. This was his first taste of big success.
His first entrepreneurial technology business after college was his computer company MicroSolutions. He grew it for seven years and then in 1990 sold it to CompuServe for $6 million.
This is how the majority or capital was distributed after the acquisition sale:
$1 million went to employees.
$2 million went to his business partner.
$2 million went to Mark Cuban.
After this windfall made him a millionaire he bought a lifetime flying pass with American Airlines and travelled the world. He grew his net worth further to $20 million in the stock market. He knew early on he would never have to work again.
He partied and had a lot of fun in those years until in 1995, he had a new business idea with a college friend for a website called AudioNet. The website made it possible to listen to college basketball games online. After online video came along he changed the name of the website to Broadcast.com. This website was the first ever online streaming company.
On July 18th 1998, Broadcast.com went public as an IPO on the stock exchange. After the run up in its stock price Mark Cuban was worth $300 million from the value of the shares in the company that he owned. The website became a primary online portal for entertainment and Yahoo! made a buy out offer and tripled the price of the stock. This made Mark Cuban a billionaire in net worth on paper.
Cuban was able to sell Broadcast.com to Yahoo! for $5.7 billion in 1999 during the peak of the Dot Com bubble and make himself a billionaire from his ownership share in the company. Yahoo! paid for the acquisition with it’s own stock YHOO.
His friend had a saying that “Pigs get fat but hogs get slaughtered.” This made Cuban think he had better find a way to keep the money he made as he was exposed to high risk in his one stock position during what he knew was a stock market bubble driven by greed.
He received $1.7 billion in Yahoo! stock for the acquisition deal. He was concerned that the stock market bubble could not continue after the crazy 1999 run up in prices and began to sell his Yahoo! stock and hedge with put option contracts to create Option Collars to preserve his wealth from a stock market crash.
- He owned 14,600,000 shares of Yahoo! stock at a value of $95 per share.
- He bought 146,000 put options at the $85 strike price.
- He sold 146,000 call options at the $205 strike price.
The option premium he paid to buy the put option contracts was equal to the premium he got for selling the covered call options, his net cost for the option play was zero dollars excluding the commission fees.
This option collar trade had two possible outcomes if Yahoo! trended strongly in either direction:
- If Yahoo! stock plunged he could sell all of his stock for $85 a share for $1.2 billion.
- If Yahoo! stock continued to trend higher above $205 a share, he would be forced to sell and have his stock called away for $205 a share for $3.0 billion.
Mark Cuban executed one of the biggest and best top ten option plays in history. He created a cost free hedge where he would be remain a billionaire whether the stock stayed where it was, plunged, or doubled in price, it was a cost free non-directional bet for wealth preservation.
After becoming a billionaire he spent millions creating the lifestyle he wanted.
He spent $40 million on a private gulfstream jet. This was the largest single online purchase in history. He bought it to save time, what he considers his most important asset.
Cuban also bought a mansion for $12.5 million that cost $25 million to build. This house was foreclosed on because the owner lost a fortune during the stock market crash.
What team does Mark Cuban own?
Mark Cuban spent $285 million dollars to become the majority owner of the professional basketball team the Dallas Mavericks of the NBA .
Mark Cuban businesses
Here are twelve of the top businesses that Mark Cubans has owning interest in.
- Mark Cuban Cost Plus Drugs
- Gameday Couture
- Nuts ‘N More
- Mrs. Goldfarb’s Unreal Deli
- Simple Sugars
- Coconet Girl
- Shower Toga
- Ready. Set. Eat
- The Living Christmas Co.
Shockingly, Mark Cuban told the Full Send podcast that he’s taken a net loss on all of his Shark Tank investments at this point in time. He clarified that he was talking about on a cash basis, only accounting for the business investments he’s already exited, saying “I haven’t gotten out more than I have put in.” So the value of the businesses may still be more on a cash flow basis than what he bought them for but he hasn’t been able to sell them and exit his ownership interest for a net gain from entry so far.
How old is Mark Cuban?
Mark Cuban is currently 64 years old and shows no sign of slowing down.
What is Mark Cuban’s net worth?
The current Mark Cuban net worth in 2022 is $4.6 billion.
Mark Cuban is listed as the #227th richest person in the United States on the Forbes 400 list. He is also ranked at #550 for the richest person in the world on Forbes.
Image created by Holly Burns