It’s important to maintain a diverse investment portfolio, whether you’ve just come into billions of dollars as Mark Cuban did in 1999 or you’re starting with a few hundred dollars.
When Cuban and his partners sold Broadcast.com in 1999, they didn’t get billions in cash -- it was all in the form of Yahoo stock. Instead of holding virtually all of his wealth in one company’s stock, he did a great job of diversifying his investments. Cuban spent $20 million hedging his Yahoo stock with synthetic indexes, and shortly thereafter acquired assets such as the Dallas Mavericks and Landmark Theatres.
It’s a good thing Cuban did all of that. Yahoo’s stock price dropped by more than 96% from January 2000 through September 2011. To put this in perspective, $1 billion in Yahoo stock would have fallen in value to just over $34 million.
The point isn't how Cuban hedged his stock holdings, it is that he hedged them and that he would have lost a huge amount of money if he had not. Applying this to the Unity shareholders, their smart move is to sell some of their Unity stock holdings and use the cash from those sales to diversify their portfolio.
Quoting from https://www.fool.com/slideshow/7-things-you-can-learn-mark-c...
5. Diversification is extremely important
It’s important to maintain a diverse investment portfolio, whether you’ve just come into billions of dollars as Mark Cuban did in 1999 or you’re starting with a few hundred dollars.
When Cuban and his partners sold Broadcast.com in 1999, they didn’t get billions in cash -- it was all in the form of Yahoo stock. Instead of holding virtually all of his wealth in one company’s stock, he did a great job of diversifying his investments. Cuban spent $20 million hedging his Yahoo stock with synthetic indexes, and shortly thereafter acquired assets such as the Dallas Mavericks and Landmark Theatres.
It’s a good thing Cuban did all of that. Yahoo’s stock price dropped by more than 96% from January 2000 through September 2011. To put this in perspective, $1 billion in Yahoo stock would have fallen in value to just over $34 million.