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eBay Sues Craigslist 283

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."
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eBay Sues Craigslist

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  • by peter303 ( 12292 ) on Wednesday April 23, 2008 @11:36AM (#23172292)
    They own 25% and sound unhappy.
    • They own 25% and sound unhappy. Yes, can someone please explain as I am not very well-versed in corporate law... what are the legal ramifications of this suit & how does one sue a company that you own 25% of? Isn't that like suing your kids while they're still teenagers or something?
      • 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.

        • Re: (Score:3, Informative)

          by Luyseyal ( 3154 )
          I withdraw my comment as Craigslist is not a public company. D'oh.

          • True so there is no share price to knock down.

            If ebay can get a controlling majority in craigslist they put the prices up to be higher than thier own and they win.

            If ebay can bankrupt craigslist they buy the name/domains at the bankrupcy sale and either redirect it to ebay or set up thier own craigslist site with ebay like pricing. Again they win.

            If they can get a settlement or judgement paid in stock that puts them closer to a controlling majority.

            snap up shares when you can and harras the company with minority shareholder lawsuits (which are likely to cause pain to a lot of companies who aren't agressively monitising thier assets) in the meantime. Also harras the company with any other lawsuits you think you can get away with.

        • I suspect the justice department or the SEC would have something to day about that particular maneuver.

          I very much doubt it's legal. It can't be.

          At the very least, wouldn't that count as malicious prosecution?

        • by GameboyRMH ( 1153867 ) <gameboyrmh@NoSpam.gmail.com> on Wednesday April 23, 2008 @01:50PM (#23173988) Journal
          So a hostile takeover is like the business equivalent of catching a Pokemon...except you're using lawsuits instead of status effects, buying shares instead of attacking, and tendering an auction instead of throwing a Pokeball. Makes sense.
          • by PopeRatzo ( 965947 ) * on Wednesday April 23, 2008 @02:32PM (#23174458) Journal

            So a hostile takeover is like the business equivalent of catching a Pokemon

            You really should talk to the newly Fox-owned Wall Street Journal about getting a job as an analyst.

            You definitely make more sense than slimy Larry Kudlow or that crazy fuck Jim Cramer who yells and spits on himself. I don't think he "went bald" so much as his hair committed suicide just to get as far away from him as it could.
      • by HUADPE ( 903765 )
        You can sue any company which you own less than 50%+1 share of. Heck, you can even sue companies that you do own (though it's stupid). The legal consequences are unknown, but presumably if eBay got sufficient damages, they could force Craig to sell more of the company, and possibly enough to do a takeover.
    • by keithjr ( 1091829 ) on Wednesday April 23, 2008 @03:39PM (#23175184)
      Probably on eBay, then Craigslist wouldn't be able to leave negative feedback.
    • by Simonetta ( 207550 ) on Wednesday April 23, 2008 @06:35PM (#23176876)
      In related news, Safeway announced that it is suing Starbucks because Starbucks is seriously undercutting its coffee sales. Safeway's public relations manager announced, "The American people deserve the opportunity to have a good cup of coffee in the morning, it's a god-given right! Starbucks is undermining that right by introducing mass confusion into the coffee marketplace. Before Starbucks, people always knew that they get their good, dependable, all-American coffee at the same store, at the same place, year after year. Now that Starbucks has appeared, they aren't sure. We have to put a stop to them. It's what Jesus would do."
  • To summarise: (Score:4, Insightful)

    by sm62704 ( 957197 ) on Wednesday April 23, 2008 @11:38AM (#23172306) Journal
    Nobody knows nothin'. If they doe, they ain't sayin'.

    But of course we're going to discuss it fully here at slashdot!
    • Re:To summarise: (Score:5, Insightful)

      by qortra ( 591818 ) on Wednesday April 23, 2008 @12:00PM (#23172628)
      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: (Score:2, Informative)

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

        Of course we'll speculate and discuss. It's an interesting situation even if we have few details.
  • by drhamad ( 868567 ) on Wednesday April 23, 2008 @11:38AM (#23172308)
    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.
    • by theMerovingian ( 722983 ) on Wednesday April 23, 2008 @11:44AM (#23172402) Journal

      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.

      • by Four_One_Nine ( 997288 ) on Wednesday April 23, 2008 @12:13PM (#23172794) Journal
        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: (Score:2, Interesting)

        by drerwk ( 695572 )
        But how do you value the first refusal in terms of cash. If he gets a $20 million offer from ebay, and craigslist doesn't have that kind of cash, isn't the outcome the same?
        • Sure, but then Ebay would have to pay that $20 million.

          Which, in essence, values the company.

          There are other ways to do it; you could allow the company the right to buy back the shares at a certain price, for example, regardless of other offers, if the shares were for sale.
      • by Anonymous Coward
        You'd be surprised how large a company can be and still make that same mistake.

        SAIC (nee SAI) http://en.wikipedia.org/wiki/Science_Applications_International_Corporation/ [wikipedia.org], number 285 on the Fortune 500 list, was employee-owned until 2006 but didn't think to add the clause giving the company right of first refusal until the first time an employee left the company and declined to sell back the stock they owned.
      • Re: (Score:3, Insightful)

        by TooMuchToDo ( 882796 )
        When I worked for a large technology consulting firm in Chicago, I was issued thousands of stock options although the company stock wasn't public. When I tendered my resignation, I was offered the opportunity to purchase the stock at the current valuation. One of the conditions was that if I sold the private stock to someone else, the company has to approve the transaction.
      • by afidel ( 530433 ) on Wednesday April 23, 2008 @02:28PM (#23174428)
        After listening to the interview on NPR yesterday with the CEO I'm not in the least bit surprised. He seemed to be a fairly cool idealist who was building a site to scratch a need and then happened to develop it into a successful small company. He has repeatedly refused to turn the company into a commercial cash cow, and as he points out 95+% percent of the dotcom's that were started with the intent of going commercial are now out of business. He has a small company with a good product that makes enough money to support their costs and keep a small number of IT people employed.
    • by arkham6 ( 24514 ) on Wednesday April 23, 2008 @12:22PM (#23172920)
      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. (Score:5, Interesting)

    by owlnation ( 858981 ) on Wednesday April 23, 2008 @11:40AM (#23172338)

    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... (Score:5, Insightful)

    by Overzeetop ( 214511 ) on Wednesday April 23, 2008 @11:40AM (#23172350) Journal
    ...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.
  • good idea (Score:5, Funny)

    by gEvil (beta) ( 945888 ) on Wednesday April 23, 2008 @11:41AM (#23172354)
    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.
    • by dryueh ( 531302 ) on Wednesday April 23, 2008 @11:57AM (#23172596)
      In other news, Craigslist is sueing casual sex.
    • I've had the passing glance at some of those ads. Some you can pay for with PayPal and credit cards.

      I don't know if I'd trust that "vendor" with a credit card though. I'm a bit concerned to where it would be swiped.

      I'd be willing to bet, some of the more computer adept "vendors" would take PayPal. Do you want that paper trail though? Cash is always best for those moments you don't need haunting you in the future. When I run for president in 2012, I wouldn't want that fou
    • by Shakrai ( 717556 ) *

      That way I'll be able to use PayPal to pay for all those, ummm, "services" I find on there.

      You must be 'Client Number Ten' ;)

  • Hostile takeover? (Score:5, Insightful)

    by R2.0 ( 532027 ) on Wednesday April 23, 2008 @11:44AM (#23172398)
    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.
    • Hostile take-over? Maybe if they offered the other private equity holders a dump truck of money.

      Maybe this is the conspiracy nut in me typing, but I think is more to just hinder the business operation of a competitor that gives its primary service away for FREE...and is still in business...and people like it.
  • by $RANDOMLUSER ( 804576 ) on Wednesday April 23, 2008 @11:48AM (#23172458)

    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?
  • by ackthpt ( 218170 ) on Wednesday April 23, 2008 @11:51AM (#23172512) Homepage Journal
    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.
    • by gumpish ( 682245 ) on Wednesday April 23, 2008 @01:02PM (#23173468) Journal

      Meanwhile, Feedback system continues to be worthless.
      A++++++++ comment, would read again!
    • by nasor ( 690345 )
      The usefulness of Craigslist can vary quite a lot too, mainly depending on where you live. I currently live in a college town, so Craigslist works pretty well - most of the people trying to sell things are savvy enough to make understand what they are selling and make useful listing.

      In my last city, on the other hand, Craigslist was littered with useless postings in which clueless people were trying to sell things that they didn't understand. 90+ percent of the adds were along the lines of "Used black an
  • by pclminion ( 145572 ) on Wednesday April 23, 2008 @12:09PM (#23172720)
    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.

    • 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.

      Before, I had 10% of a company worth $5000, or $500. After I have 8.3% of a company worth $6000, or $500. So how does this dilute the value of my shares? How am I getting screwed?

      If the chairman pockets the extra $1000, that's just good old fashioned embezzlement. That has nothing to do with the

      • Before, I had 10% of a company worth $5000, or $500. After I have 8.3% of a company worth $6000, or $500. So how does this dilute the value of my shares? How am I getting screwed?

        You get screwed if that $1000 is spent frivolously, down a rat hole or otherwise. In other words, spent in a way that does not equitably raise value for all shareholders.

      • by khallow ( 566160 )
        Suppose the chairman decides to give those shares to another person in exchange for services. Then you have 8.3% of a company worth $5000 plus whatever that other person delivers. You might agree that the exchange was worth it, or you might not, but your shares in the company have been diluted.
    • Yeah, eBay may have a valid legal case, though without more info we can't really say. On the other hand, it should be made very clear that they don't deserve any sympathy. They only own part of Craigslist through a very slimy attempt to use a betrayal within Craigslist to take over the company and ruin it. It would be in the best interest of everyone in the world who doesn't own eBay stock for eBay to lose every claim it has to Craigslist ownership.
    • Re: (Score:3, Insightful)

      by fm6 ( 162816 )
      Technically you're correct. But I find it hard to believe that eBay really cares about dilution of their interest in a small, marginally profitable company. What they do care about is that company's failing to make the most of its potential revenue streams. I suspect this suit is really about getting leverage to make them start charging for some of the services they now give away.
  • Is it just me ... (Score:5, Interesting)

    by gstoddart ( 321705 ) on Wednesday April 23, 2008 @12:22PM (#23172906) Homepage
    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.

    • by Shakrai ( 717556 ) *

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

      "Well on its way"? Dude, that plane had a tailwind and arrived several years ahead of schedule ;) eBay has been an 'evil .com' for at least the last few years.

      • "Well on its way"? Dude, that plane had a tailwind and arrived several years ahead of schedule ;) eBay has been an 'evil .com' for at least the last few years.

        Well, I haven't used them since likely before 2002. So, my exposure to them nowadays is limited to new stories. :-P

    • ebay has ALWAYS been an evil.com

      the last round of changes (on ebay) have alienated the last wave of those who use ebay for convenience. for those that rely on them for their living (always suspect; but hey, whatever ...) they have no choice but those of us who CHOOSE to use ebay - the exodus has started and ebay has lost off their goodwill.

      around the time that ebay bought paypal, that was truly the beginning of evil.com for them.
  • How exactly is this a "random move"? eBay is upset that Craigslist is (they claim) doing something illegal that harms eBay. So they're suing. Random how?
  • by MarkEst1973 ( 769601 ) on Wednesday April 23, 2008 @12:23PM (#23172954)
    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.
  • buy craigslist and flip it on eBay for a quick buck!
  • Craigslist suspects eBay's intentions are less than honorable...

    Seems eBay posted the lawsuit on the "Casual Encounters" board.

  • Letter to Ebay (Score:5, Interesting)

    by kurisuto ( 165784 ) on Wednesday April 23, 2008 @01:05PM (#23173494) Homepage
    eBay Inc.
    2145 Hamilton Avenue
    San Jose, California 95125

    Dear Sir or Madam,

    I read that eBay has sued Craigslist on the grounds that eBay's shares in Craigslist have been "unfairly diluted." The details of the case are under court seal, but there is speculation, both in the public comment by Craigslist and on boards such as Slashdot.com, that eBay's real intention is a hostile takeover of a competitor.

    In my view, Craigslist is one of the most popular services on the Internet due largely to its largely non-commercial nature. A possible outcome of the case is that Craigslist would be taken over and overrun by ads, and that it editorial policies would be changed to reflect more heavily commercial goals, to the great detriment of the quality of the service. I do not want to see this happen to this excellent community service. If the essential nature of Craigslist is degraded as a result of this lawsuit, then it is my intention to permanently boycott eBay and PayPal, to shift my business to eBay's competitors, and to encourage others to do likewise.

  • by GReaToaK_2000 ( 217386 ) on Wednesday April 23, 2008 @01:39PM (#23173874)
    Lame, there goes a free mechanism to sell junk in my basement.

    Taking it out on craigslist because they (eBay) upped their prices and fees due to the fact fewer people use them... Nice. It has nothing to do with all the discussions in the news about the US economy sucking wind is really squeezing families making less than $100K a year.

  • by mrraven ( 129238 ) on Wednesday April 23, 2008 @02:56PM (#23174736)
    Take note Libertarian fundamentalists, your flawed assumption is that companies will compete fairly leading to good outcomes for all. But that's not how it works in the real world where in fact companies are run by greedy people who will use any tactic fair or foul to win. Whether it's sleezy stock deals, lawsuits, or working to gain monopoly companies CANNOT be trusted to compete fairly in the so called "free market" which is full of foul collusion that screws the little guy and leads to bad outcomes for all. Like or not that is why we have regulation of markets above and beyond just making sure contracts are fair as Libertarians would like it.

    Thus you FAITH in the free market is no more founded in empirical reality than the faith of creationists. Time to go back to the drawing board now that empirical reality shows you are living in a fantasy world with assumptions about human nature every bit as flawed as the communists were.
    • Re: (Score:3, Informative)

      by iamhigh ( 1252742 ) *
      Your flawed assumption is that the government can be trusted to properly regulate companies. I don't know about you, but at this moment in time I will take the companies. It is easy to stop using ebay, it isn't as easy to stop using the government.
      So when you have implemented a government that ISN'T run by corporations, cares about the people of the state, and is worthy of me putting all my eggs in that basket... then I will admit that the free market is not the way to go.

Nondeterminism means never having to say you are wrong.