EBay.com, a highly popular and huge online auction and shopping website filed a lawsuit against Craigslist, one of the top advertising companies featuring free ads for everything from jobs to services and products to personals, for a network of online communities.
You might wonder how both these popular giants are connected. EBay had acquired 28.4% interest in Craigslist in 2004, making it a minority share holder in Craigslist.
Things do not seem to be fine on the home front. On Tuesday, a lawsuit was filed by eBay against Craigslist, with the Delaware Court of Chancery, in the State of Delaware, which is a forum that resolves disputes between companies registered in Delaware.
According to eBay, the reason behind them filing the lawsuit is that two directors of Craigslist, Craig Newmark and their chief executive, Jim Buckmaster, have unfairly entered into transactions that have diluted eBay’s economic interest in the company by more than 10 percent. EBay alleged that both the directors have breached their fiduciary duties.
EBay is keeping silent on further details about the nature of the transactions entered into by the directors of Craigslist. The reason for the silence is said to be the confidentiality requirement of some of the information given about Craigslist in the complaint, which is filed under seal.
However, Mike Jacobson, eBay’s senior vice president and general counsel, revealed through a written statement that, “The recent actions by the Craigslist directors have disadvantaged eBay and its investment in Craigslist.” He said, “Since negotiating our investment with Craigslist’s board in 2004, we have acted openly and in good faith as a minority shareholder, so we were surprised by these recent unilateral actions. We are asking the Delaware court to rescind these recent actions in order to protect eBay’s stockholders and preserve our investment.”
Craigslist responded to this lawsuit fiercely by saying that the eBay lawsuit is “unethical and unfounded.”
Craigslist hit back at eBay through a blog post, saying “We are surprised and disappointed by eBay’s unfounded allegations, which came to us out of the blue, without any attempt to engage in a dialogue with us,” the blog post said. “Coming from a shareholder that views Craigslist as a prime competitor, filing suit without so much as mentioning these assertions beforehand seems unethical, and hints at ulterior motives.”
The blog post goes on to say that Craigslist has always meted out a fair treatment to eBay, the minority share holder, and will continue to do so in the future as well. They also said, “EBay has absolutely no reason to feel threatened here — unless, of course, they’re contemplating a hostile takeover of Craigslist, or the sale of eBay’s stake in Craigslist to an unfriendly party.”
With both, eBay and Craigslist flinging accusations at each other, only time will tell who is at the receiving end, whether it is eBay that has been given a raw deal or if it is Craigslist that is being taken for a ride by a minority share holder.