EBay Sues Craigslist over ‘Dilution’

EBay bought a roughly 28% stake in Craigslist in 2004 from a third party no longer associated with the site. It then proceeded to “go to school” on Craigslist and launch competitor Kijiji, which is reportedly doing very well (especially in Canada and outside the US). The site is directly competitive and seeks explicitly to overtake Craigslist if it can.

In that context I find it ironic that EBay has now sued Craigslist and directors Craig Newmark and Jim Buckmaster for “diluting” the value of its minority interest:

In 2004, after negotiating the transaction with craigslist’s board, eBay acquired a minority ownership interest in craigslist of 28.4 percent.

In January 2008, however, Newmark and Buckmaster adopted measures that, among other things, unfairly diluted eBay’s economic interest in craigslist by more than 10 percent. By taking these unilateral actions, eBay believes that Newmark and Buckmaster breached their fiduciary duties in violation of Delaware corporate law.

Craigslist may currently be worth up to $5 billion. Eighteen percent of $5 billion is roughly $900 million — serious money.

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Here’s Jim (Buckmaster?) responding on the Craigslist blog.

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