eBay have revealed some more details of their lawsuit against Craigslist. The full complaint is now available online, but the gist of the matter goes like this:
In 2004, one of Craigslist’s shareholders sold his 25.1% share to eBay. As part of that contract, it was agreed that if eBay ever set up a competitor to Craigslist, it would lose the “right of first refusal” to buy further Craigslist shares.
In 2005, eBay set up kijiji.com, a classified ads business, and in 2007, kijiji became available in the US. Craigslist duly notified eBay that this was competitive activity. Craigslist founder Craig Newmark and CEO Jim Buckmaster told Meg Whitman that they were no longer happy with eBay as a shareholder, and suggested that a new home be found for the shares which eBay held. Meg responded that eBay was happy with its investment, and would in fact like to buy the rest of the company whenever Newmark and Buckmaster felt that would be appropriate.
According to the complaint, Newmark and Buckmaster responded to this by holding “a series of clandestine meetings” to try to keep eBay’s representative off their board, and altered their corporate governance to protect them from an “unwelcome takeover”, adopting a ‘poison pill’ which prevents eBay from selling their shares to anyone not approved by the Craigslist board, and issuing extra shares which diluted eBay’s share of the company to below 25%, meaning that they lost the right to appoint a representative to the Craigslist board.
Craigslist’s blog says “we have an uncomfortably conflicted shareholder in our midst, one that is obsessed with dominating online classifieds for the purpose of maximizing its own profits”. Their response will be filed in the next few weeks.
The New York Times has a slightly longer summary of the complaint if you want more details.
2 Responses
I’m trying to work out what’s wrong with maximizing profits? I like to make as much profit as I can… why wouldn’t anyone else?
It’s not like Newmark and Buckmaster themselves haven’t made enough out of the highly profitable cash cow otherwise known as Craigslist
In fairness to N&B, they’ve built up a very successful brand with an incredibly committed community, on the back of a website that looks like it’s a refugee from 1995, and with a company that doesn’t have any whiff of big business about it, regardless of what actually goes on in people’s bank accounts. I think for them to be owned in full or even in larger part by eBay would horribly damage that, so I can understand why one might want to prevent eBay getting both feet in the door. If the complaint is accurate though, it’s been gone about in the wrong way completely.