Craigslist Investor eBay Sues Craigslist. Seriously

This one ought to be fun: eBay, which owns a 28% interest in Craigslist, is suing… Craigslist. The paid auction site says the free auction site “unfairly tried to dilute eBay’s stake in it.” AP:

But in January, eBay says, Craigslist’s board, consisting of founder Craig Newmark and Chief Executive Jim Buckmaster, unilaterally acted to dilute eBay’s economic interest in Craigslist by more than 10 per cent.

The company is asking Delaware’s Court of Chancery to negate the board’s actions.

The complaint is under seal at eBay’s request, according to a company statement.

That’s the entirety of the story, for right now. From where we sit, “unfairly tried to dilute eBay’s stake” can only mean one thing: That Craig and co tried to take on an additional investor. But that begs a whole set of questions, mainly:

  • Who wanted to invest in Craig and co, and at what valuation?
  • More important — why would Craig and need more money? By any measure, they’re rolling in it.

UPDATE: eBay’s press release in comments below.  The “dilution” event has already happened.  It also could be an expansion of the option pool or some other means of transfering equity value to employees/shareholders other than eBay.

Here’s Craigslist’s response:

We are surprised and disappointed by Ebay’s unfounded allegations, which came to us out of the blue, without any attempt to engage in a dialogue with us.

Coming from a shareholder that views craigslist as a prime competitor, filing suit without so much as mentioning these assertions beforehand feels unethical somehow, and hints at ulterior motives.

Ensuring the future well-being of craigslist and the craigslist community is admittedly very important to us. But Ebay has absolutely no reason to feel threatened here — unless of course they’re contemplating a hostile takeover of craigslist, or the sale of Ebay’s stake in craigslist to an unfriendly party. (In which case, they’re out of luck!)

For our part, we have always treated Ebay very fairly as a minority shareholder, and plan to continue doing so, despite this unfortunate development.

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