Craigslist has responded to eBay’s lawsuit (opens in .pdf) in which it was alleged they had adopted a ‘poison pill’. This prevents eBay from selling their shares to anyone not approved by the Craigslist board, and issued extra shares which diluted eBay’s share of the company to below 25%. The result is that they lost the right to appoint a representative to the Craigslist board.
Their response emphasizes that eBay had, and still has the same opportunity to enter into a right of first refusal (ROFR), meaning only Craig Newmark, founder of Craigslist and Jim Buckmaster CEO of Craigslist could purchase their shares. This would result in eBay being granted additional shares restoring their original 28.4% stake in the company.
eBay assert that accepting the ROFR provides no benefit to them and have been free of the ROFR since June 2007, meaning they are free to sell their shares at will. Newmark and Buckmaster were still bound to each other with each only able to sell their shares to the other. Naturally this claim is denied in the response by Craigslist.
Craigslist admit many of the points that caused eBay to sue them, but in their defence claim that they were acting as directors in the best interests of the company and are protected by law for doing so.
What the complaint doesn’t answer is were the changes made to protect the company, or were they made for the sole benefit of the two majority shareholders?
