eBay Sues Craigslist

phpmysqldev writes "In a very random move eBay has filed a lawsuit against Craigslist to 'protect its investment and shareholders'. "In a statement, eBay claimed that in January, Craigslist executives took actions that 'unfairly diluted eBay's economic interest by more than 10%'." eBay is a minority shareholder of Craigslist owning 28.4%. Craigslist suspects eBay's intentions are less than honorable, speculating about a possible hostile takeover. The court case is sealed and eBay has not elaborated on its claims."

would eBay sell craigslist on eBay or craigslist?

They own 25% and sound unhappy.

Re:would eBay sell craigslist on eBay or craigslis

Hostile takeover. Ebay files the lawsuit to devalue the shares. Then, Ebay buys up more and more shares to have greater control over an eventual vote. Ebay tenders an offer for Craigslist. Since it owns more, it can influence the shareholder vote more significantly. Ebay wins the auction (ha) and cancels the lawsuit.

-l

Mod parent Informative!

Wish I had mod points. This is the most informative post I've read this year!

For those of you that are going to ask

1) Craigslist is a closely held company not traded on the open market
2) This is a dilution suit. This means that basically, in a closely held company, it's easy for a majority shareholder to screw a minority shareholder, since the minority shareholder can't outvote them and can't get other shareholders to support it. Therefore, we have a lot of laws protecting minority shareholders. In this case, it seems that eBay has issued extra stock, which means that eBay no longer really has 28%, but rather less, effectively. This CAN be legal, but there has to be a solid, nonpredatory reason for it.
3) eBay managed to get its share because craigslist had issued some shares to close employees, on the assumption that it didn't matter and was just to feel nice. One of those employees decided to sell his stake publicly, and eBay bought it. Normally, no one would have been able to get access to Craigslist stock.

Re:For those of you that are going to ask

Yeah Craigslist's attorney really F'ed that up - you can include a clause in the bylaws or a shareholder agreement which provides that the company has the right of first refusal to redeem any outstanding shares. That is pretty basic stuff, I am surprised they didn't think of it.

Re:For those of you that are going to ask

When they needed a lawyer, they probably just looked on Craigslist...

I wonder if they offered to pay with a cashier's check for a few hundred dollars over his fee.

Re:For those of you that are going to ask

Craigslist is a pretty amateur operation. [Which is how they seem to want it.]

Exactly. I had a couple of brief discussions over posts with Craig himself, back when he was CEO, and he saw craigslist as a community and runs it as if it were. I understand and respect this, being a San Franciscan myself; I find Craig's attitude to be an expression of The City's values with respect to greed and capitalism. Craig rightly values friends and having duty and loving work combine.

N.B. Craig likes to code. I take that back. He LOVES to code. That's why someone else is CEO. Craig just wants to hang out with his friends (perhaps hundreds or thousands of them) and invent things to do with computer programs.

Sounds like a good life to me! That's the nature of San Fran City and that's what made me fall in love with it lo so many years ago.

Re:For those of you that are going to ask

<quote>
3) eBay managed to get its share because craigslist had issued some shares to close employees, on the assumption that it didn't matter and was just to feel nice. One of those employees decided to sell his stake publicly, and eBay bought it. Normally, no one would have been able to get access to Craigslist stock.</quote>

That happens more than you think. I know of at least one case in my hometown where a farm family who had a large farm generations (I think back to the 1850's or before). He did some legal mumbo jumbo where he sold shares of the farm to his kids, thinking they would keep it in the family and they could profit from the farm, etc.

Well, one son decided not to keep the shares, so he sold them off to Con-Agra, a major farming corporation. Shortly thereafter, Con-Agra filed a minority stake lawsuit against the farmer, bankrupt him in court fees and lawyers, and the farmer was forced to sell the rest of the farm off to Con-Agra.

Congratulations Con-Agra, you got about a 10 million dollar farm for no more than 2 million!

yep.

Craigslist suspects eBay's intentions are less than honorable

Yes, indeed. They only bought into Craigslist so they could get ideas to develop kijiji (which was secretly being developed during the share purchase), and of course so they could exercise some control over their main competitor.

eBay's intention was never honorable, and that was obvious. Why ANYONE would ever think otherwise is incredible, they have no track record of honorable. At least not since Jeff Skoll left.

Sounds like...

...they added a poison pill to the articles (or however corporations do such things) in order to prevent a hostile takeover. As a result, ebay's position and their ability to potentially take over Craigslist has been diminished. Boo hoo, cry me a river.

At first, I thought ebay was suing because craigslist was cutting into ebay's auction business. That would be ridiculous, which in American lawyerese seems to be spelled "with merit". Then I was shocked (shocked!) to learn that ebay owns almost 30% of craigslist. Nice little empire, indeed. In reality, it's just a pissing match.

Re:Sounds like...

That would be ridiculous, which in American lawyerese seems to be spelled "with merit".

Yet in Slashdotese it seems to be spelled "rediculous".

good idea

I think it'll be nice if eBay takes over Craigslist. That way I'll be able to use PayPal to pay for all those, ummm, "services" I find on there. Plus I won't need to worry about my wallet disappearing.

Hostile takeover?

How could eBay perform a hostile takeover? I believe the balance of Craigslist stock is privately held, and NOT on the open market. I don't think eBay can force someone to sell stock to them.

That being said, I think this is the long delayed consequences of selling that stake to eBay in the first place. Unless there is some special language in the company charter, the commonly accepted duty of corporations is to maximize benefits to the shareholder (not saying that it is right, only that it IS). I think eBay bought in years ago expecting to cash in on the big IPO, which never happened, or reap dividends when Craigslist started accepting ads, which it didn't. Now they want to use their minority share position to force the Craigslist management to run things the way eBay wants it.

I hope Craigslist crushes them, but I'm not betting on it.

Kettle, meet pot

EBay's general counsel Mike Jacobson said: "...so we were surprised by these recent unilateral actions."

What, are they forcing you to use (only) PayPal?

Did they sue them...

Did they sue them because Craigslist isn't obfuscated, confusing, feature-bloated and buggy enough to suit them?

Just curious.

I've listed and sold a few items on eBay over the years, including recently and must say, eBay continues to get it wrong. What a fussy, buggy system. Simply interfaces gave way to bloated, unpredictable and just silliness.

As a buyer, the searches are less helpful all the time. "Look, dumbasses, I'm trying to find what I'm looking for," not a lot of other tripe you think I might be interested in.

eBay, want something to do? Go after those fecking frauds selling fake shite out of China. That should keep you busy for a while.

Meanwhile, Feedback system continues to be worthless.

Let me put it in terms you can understand.

Seems like a lot of people don't understand what this economic "dilution" thing is, and why eBay is so upset. Imagine it this way.

You, and nine friends, all pitch in $500 for a classic video game collection (a total of $5000). Each person has a 10% stake, so if the games go up in price, everyone profits.

Now imagine that the "chairman" decides to sell an additional $1000 stake to a new participant, ostensibly to purchase more video games. In return this person gets 17% ownership of the video game collection.

Do you see how this dilutes your share of the value? The $1000 stakeholder now has 17%, leaving you with only 8.3%. And suppose that the $1000 of new capital is used to purchase bogus games which have no real value, or even worse, is just pocketed by the chairman. You're getting screwed.

That's what it means when they say you need a "sound financial reason" to dilute the other shareholders' stakes.

The real question is, does Craiglist have this sound financial reason? Is the issuance of fresh stock going to lead ultimately to a gain for all parties? We don't know -- and that's the subject of this lawsuit.

Is it just me ...

Is it just me, or is eBay well on its way to becoming yet another evil .com?

They seem to becoming obnoxious and litigious bastards more and more. Then again, maybe we just don't see the "eBay saves kittens from pound" stories.

I gave up on eBay years ago, but it seems like the only time I hear their name nowadays is in a story which shows them to be rather annoying.

Cheers

Greed and eBay's sagging revenue growth

Craigslist is a untapped gold mine [paulgraham.com], and eBay knows it. eBay's growth is tepid, at best, and they need some way to appease Wall Street. Why not connive plans on a hugely profitable yet potentially hugely more profitable site like Craigslist? If a hostile takeover was ever their goal and Newmark and Co. nipped that idea in the bud, I'd be a mad eBay, too.

Re:A problem?

CowboyNealslist. *shudder*

Re:A problem?

CowboyNealsList: When it comes to selling stuff, we are always the last option!

Re:Ummm... unfairly?

No. That's not it at all -- they're suing because Craigslist did something that hurt the value of ebay's stock in Craigslist.

The complaint is sealed, so we don't know exactly what it was. It *could* be something like the following: The stock is worth, say, $100 per share, and ebay owns about 28% of it. Craigslist decides to sell a bunch of shares to Craig at $50 per share. Ebay is hurt because the value of its investment went down, but the value to Craig went up. Basically, it's a breach of the company's duty to the minority stockholder. It has nothing to do with competition.

Re:To summarise:

Just so I know; is this supposed to be parody? I'm pretty sure that whatever it is, I don't get it.

Nobody knows nothin'

We know that Ebay sued Craigslist.

But of course we're going to discuss it fully here at slashdot!

Indeed, as we should. Speculation is a valid component of discussion.

Re:To summarise:

Don't get too wrapped up in it - That's mcgrew. He posts prolifically even when he has absolutely nothing to say...

Yeah, he's pretty bad, but he ain't got nothing on "Anonymous Coward". That guy usually makes dozens (hundreds!) of posts per story and 90% of them have absolutely nothing to say ;)

Re:Uh, no

Well, what if craigslist wanted to bring on new employees (or incent existing people)? In that case they'd have to issue more shares and *all* shareholders already in the company would get diluted - nothing illegal or immoral about that. Existing minority shareholders might not be happy about it or agree with the board's decision, but it's not their call to make.

Re:way to rock old news

/. isn't an actual news site. It's a blog. If you want hot-off-the-press news, go somewhere else. If you want rational, informational discussions with a wide variety of people, try digg.