Regardless of whether you see Martha Stewart as an American tragedy or the source of a good laugh, the suffering of her company's shareholders is serious business.

Since allegations of possible insider trading surfaced a year ago, shares of Martha Stewart Living Omnimedia Inc. have fallen 50 percent. Stewart repeatedly has denied any wrongdoing, but was indicted Wednesday on charges of securities fraud and obstruction of justice. In addition to the criminal charges, the Securities and Exchange Commission sued her Wednesday, alleging insider trading. Stewart said late Wednesday that she would step down as chairwoman and chief executive officer of the company, but would remain on its board.

All this over a trade in only about 4,000 shares of stock worth $228,000 in a friend's company, ImClone Systems Inc. If she traded with advance, inside knowledge of bad news about the company's experimental cancer drug Erbitux, as the SEC alleges, she avoided a loss of $45,673 - not much for someone at one point worth more than $1 billion.

Meanwhile, the long investigation and controversy have cost her own shareholders about $180 million by putting the future into question.

Is regulators' pursuit of the fashion guru really worth the price paid by those folks?

Sure it is. Stewart's business partners - for that's what shareholders really are - have plenty of reason to be furious at her, but should kick themselves as well.

Any shareholder could have dumped the stock at any time after the investigation became public knowledge. In the first few days after the news broke, the stock dropped by about 20 percent, to about $15. A worried investor who got out at that point would have avoided an additional 40 percent loss as the shares fell to about $9 when news of the pending indictment broke on Tuesday.

Those who chose not to sell were gambling that things would turn around. So far, the situation has only worsened, though shareholders could enjoy big gains if Stewart is exonerated and the shares rebound. (Ironically, ImClone shares have done just that amid good news recently on Erbitux.)

Are regulators picking on Stewart because she's a celebrity and a woman?

It doesn't look that way. Her ImClone trades popped up as regulators looked at suspicious selling by ImClone insiders. They had no choice but to take a look, and her claim that her ImClone sale was by prearrangement are unverified.

If she did sell with insider info, what's so terrible about that?

Well, it's against the law. More important, it's against the law for a good reason. All investors are supposed to have equal access to information about publicly traded companies, so that winning and losing is the result of one's judgment. If some players get information before others, they're cheating.

And insider trading is not a victimless crime. The investors who bought Stewart's ImClone shares presumably didn't know about the bad news to come. When it hit, the share price fell and they were saddled with the losses that should have been hers.

Like so many scandals, this one includes allegations of a cover-up that was more damaging than the original offense. If Stewart lied about ImClone trade, she was deceiving not just the regulators but the shareholders in her own company. People who held Martha Stewart Living stock or bought it because she'd led them to believe her reputation would remain solid were cheated.

The controversy is another lesson for small investors about the hazards of having too many eggs in one basket. Anytime you invest in an individual stock, you take more risk than you do if you spread that money among the dozens or hundreds of stocks you can easily buy through a diversified mutual fund.

In this case, the risk was especially high because the fortunes of Martha Stewart Living were so closely tied to Stewart's reputation. And because she had voting control of the company, no one could have forced her to step aside until the air cleared.

Granted, a scandal such as this was impossible to foresee. But the fates could have frowned on the company in a more mundane way - the founder could have fallen ill, died or simply lost her Midas touch.

Shareholders gambled, and losing is part of the game.

Jeff Brown is a business columnist for The Philadelphia Inquirer. E-mail him at brownjphillynews.com.