The Corporate Law Group

Classified Ad Death-Match

Now that eBay and Craigslist are well on their way to putting most newspapers out of business, they have turned on each other. In 2004 eBay bought about 28 percent of Craigslist. Craigslist is still private. eBay apparently started operating it’s own classified service called Kijiji after making the Craigslist investment though the Buzz never heard of it or used it. Now eBay claims that the Craigslist Board did something in January that unfairly diluted its ownership in Craigslist by 10 percent. eBay sued Craigslist last month claiming breach of fiduciary duty. And in an unusual move (probably motivated by one or more confidentiality obligations, and since Craigslist is privately held), eBay filed the lawsuit under seal (now recently unsealed). Craigslist says that eBay never even tried to talk about what they viewed as wrong; they just rushed to court. The unsealed complaint suggests otherwise. Craigslist CEO Jim Buckmaster denies the allegations of the lawsuit and sees sinister motives, citing a possible “hostile takeover.” Of course that only works when you are publicly traded and do not control a majority of the stock. Since Craigslist is private we can’t evaluate the possibility of a takeover but all eBay would have to do is contact other shareholders and offer to buy their shares, not file suit. It looks like maybe the complaint is aimed at re-claiming eBay’s rights of first refusal, which Craigslist argues were lost when the competitive Kijiji site was created. It also looks like Craigslist engaged in questionable dealing to deny eBay it’s Board seat. In any event, the Buzz says get out the popcorn.
Paul Marotta

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