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The eBay Vs. Craigslist Lawsuit

This story was written by Rafat Ali.


eBay (NSDQ: EBAY), which filed a lawsuit against Craigslist earlier this month, has made public the details of the lawsuit (though with some parts censored out), and has more details besides the general allegation that the Craigslist board had diluted eBay's 28.4 percent stake in the online classifieds site. Craigslist CEO Jim Buckmaster told Meg Whitman last summer that it wasn;t comfortable with the stake, and would "wish to explore options for our repurchase, or for otherwise finding a new home for these shares," the lawsuit copy says. Whitman responded via e-mail last July with an offer to buy out Craigslist, the lawsuit says. After that, the suit says that Craigslist tried to adopt a poison pill provision, to fend off such a move by eBay. "Defendants' actions are a thinly disguises stratagem to force eBay to sell its shares to them (or the Company they control) at below market price," the suit says.

Craigslist considers eBay's own classifieds site Kijiji a competitive activity that nullifies some shareholder rights eBay had when it bought the stake...eBay thinks Craigslist went too far in interpreting what those rights were. Among the moves by Buckmaster and Craig Newmark, as this WSJ story points out: as an "inducement" to persuade eBay to enter into a new "right of first refusal" agreement, the two authorized the issuance of one "reorganization share" in Craigslist for every five shares owned by a shareholder who agrees to the "right of first refusal" agreement, according to the lawsuit.

As for Craigslist's response, it said on its blog that it will file the formal response in the next few weeks. "Sadly, 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."

The full lawsuit is here as PDF.


By Rafat Ali

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