The questions I would ask are:


1) How likely is it that Martha Stewart guilty of whatever they are accusing her of doing?


2) How large of an adverse effect will her guilt have on the intrinsic value of her company?


3) What is the approximate intrinsic value of her company?


Well, I'd look at #3 first in this case. For the company to trade at over $13 a share I think the market is factoring in long term 20% growth in earnings. YMMV of course. But this already doesn't make much sense to me because although this is a plausible best case I would expect a market price to take into account a range of possible earnings growth rates.


I have no idea what a good legal opinion of Martha Stewart's situation should be, so I'm in no position to directly answer your question. But I'm suggesting that you put numerical values--your best rational estimates--on the 3 points above before making your bet.