Slashdot Mirror
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."
They own 25% and sound unhappy.
Nobody knows nothin'. If they doe, they ain't sayin'.
But of course we're going to discuss it fully here at slashdot!
mcgrew's razor: Never attribute to stupidity that which can be explained by greedy self-interest
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.
-Daniel
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.
...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.
Is it just my observation, or are there way too many stupid people in the world?
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.
This guy's the limit!
They aren't suing because they're competition, they're suing because they own 28% of Craigslist, and Craigslist has been (supposedly) diluting their share. This is EXTREMELY illegal, if done for reasons other than sound financial judgment (and I can't believe Craigslist has a legit reason for issuing more shares, if that is what they've been doing).
Regardless of what you think of eBay, this is a bad deal by Craigslist, if true.
-Daniel
CowboyNealslist. *shudder*
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.
"As God is my witness, I thought turkeys could fly." A. Carlson
No folly is more costly than the folly of intolerant idealism. - Winston Churchill
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.
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.
A feeling of having made the same mistake before: Deja Foobar
ebay actually owns a minority interest in Craigslist. Minority shareholders are protected by the corporate laws of most states from abusive practices by the majority shareholders. In this case, ebay claims that the majority shareholders diluted the value of their shares in an unspecified way. Most likely, Craigslist issued additional shares of stock (thus reducing ebay's proportional ownership), or took property from the company in a way that reduced the value of ebay's investment.
Minority shareholders are a major hassle, and it was a pretty sloppy bit of work that ebay was able to acquire the shares of Craigslist in the first place.
"If you think you have things under control, you're not going fast enough." --Mario Andretti
Ebay is a minority shareholder in Craigslist. They aren't upset about any sort of competition. We don't know exactly what they are upset about, as the case is sealed. Most likely Craigslist has introduced a flood of new shares in order to reduce ebay's influence on the company.
P.S. I'm not sure if you are trolling or not, but not everything can be so easily summed up by jumping to conclusions about evil corporations and their anti-competitive nature.
I got a catholic block.
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.
CowboyNealsList: When it comes to selling stuff, we are always the last option!
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
Lost at C:>. Found at C.
Craigslist is a untapped gold mine, 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.
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
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I withdraw my comment as Craigslist is not a public company. D'oh.
-l
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Makes you wonder if this wasn't eBay's point in buying the stock initially. Buy it, wait for actionable item, sue, take over, profit... Not a bad plan.
The CB App. What's your 20?
There is another comment that explains how they got their shares.
-l
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/. 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.
Wish I had mod points. This is the most informative post I've read this year!
Your brain is not a computer.
Online auction site eBay acquired a 28.4% stake when it bought shares from a former employee who had been given equity by Mr Newmark.
Public company: Shares for sale to/from anyone via the official markets (NASDAQ, AMEX, NYSE). Private company: Shares for sale to/from anyone via go find them yourself and hand over the cash in person.
(Ignorance of the business world is bliss.)
Ignorance of business gets you screwed by the first unscrupulous person you have to do business with. Good luck with that unless you're a hunter/gatherer hermit who never does business with anyone.
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.
(Signature)
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/, 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.
It's better when you win it!
They bought stock, which is privately held. On a tiny amount of companies are traded on an exchange. The vast majority are private.
Bill Clinton: Pimp we can believe in. - The Shirt!!!
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.
Please...
Good clarification on why they're suing. To elaborate on your suggested scenario: Craigslist, as a closely held company, has no public market for its shares, and therefore its shares are hard to value. In this case, the company can typically exercise its judgment on its own valuation in the case of a new offering of shares or options. You can definitely say that $100/share is the fairest price to pay for new shares in a company that is trading at $100/share on the stock market, but in the case of a private company like Craigslist, or M&M Mars, every party does their own evaluation based on comparable public companies, discounted cashflow valuation, liquidation value, etc.. Two parties could easily value a private company, one at 50, and the other at 100.
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.
"When information is power, privacy is freedom" - Jah-Wren Ryel
Just yesterday Marketplace conducted an interview with the Craigslist CEO. You can listen to the interview on their site (it's the "listen to story" link, not the "listen to show" link). It's a pretty interesting interview -- one of the questions was "why aren't you running advertising?" And the answer was "because it's annoying and we think annoying our customers is stupid." When I heard him say that, I sat back and thought "Yeah! Nice to hear a CEO who really gets it."
They're a profitable company; but not madly, hugely, enormously profitable the way they could be. I like that. Capitalism offers powerful incentives to participate in the economy, which is generally good; but it also has a tendency to encourage empire-building and delusions of grandeur. So it's nice to see a company once in a while which isn't hell bent on world domination.
I wish their pages were a bit better designed, though. I appreciate the focus on navigation, but would it kill them to put borders around some of the boxes full of lists, to visually group them? And they could make some improvements for screen reader users, especially adding headings so that blind visitors could have their screen readers jump to the headings in the page rather than having to wade through everything that comes before the part they're interested in.
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.
Tired of all the isms, don't exploit people as an employer, or a government, mmmmK?
Probably on eBay, then Craigslist wouldn't be able to leave negative feedback.
Don't forget that Ebay's going to take around 10% of the proceeds anyway, maybe more for small items.
Unfortunately, Ebay still has its place. If I'm trying to sell an obscure piece of vintage electronics gear, for instance, I'm probably not going to do very well listing it on Craigslist. (I'd do even worse if I didn't live near a major metro area.) This is where Ebay is perfect, because you can sell obscure goods to an international audience very easily. Unfortunately, Ebay doesn't seem to care about that, and would rather cater to "power sellers" who sell boatloads of phone chargers and other cheap Chinese-made junk with high "handling" fees.
I really wish someone would make a viable competitor to Ebay.
"Untapped gold mine" means that there is an extractable, non-renewable resource that can be tapped for immediate revenue. I think it's a very apt description for how a company like eBay would look at craigslist:
A resource that they could extract advertising revenue for ~10-20 quarters, while destroying its value, and then move on to the next mine.
Craigslist current business model, however, can be better described as something like a tree farm or sustainable exploitation of a fishery, where the revenue production is comparatively modest in the short term, but consistent in the long term.
If you own part of a private company, you want to either just be a silent partner or you want you want to have controlling interest. Anything under 51% is not controlling interest. If you have less than 50% then you are at the whim of any decision you partners want to make, as long as that decision is within the laws and bylaws controlling your company.
Now if the Board (typically put in place by the majority owner, unless you have a close holding and cumulative voting) issues a bunch of shares without a previous non-dilution agreement, there will be a dilution of shares and potentially value. This is what eBay is complaining about.
From what I have read, the Board issued shares to another entity increasing the number of shares outstanding. Therefore, eBays original number of shares now come from a larger amount of shares, thus they have a lower percentage. As the value of eBays interest is based on the percentage of shares they basically have seen a forced decline in their investment. The Board has a legal fiduciary responsibility to all shareholders equally to give them value for their investment. eBay is suing as they believe that the Boards actions impacted the value of their shares, by reducing the percentage of the total value they are due.
A positive attitude may not solve all your problems, but it will annoy enough people to make it worth the effort.
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."
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.
note: i'm known as plugwash most places but i screwd up registering that here somehow in the past and now can't register