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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.
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
...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?
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
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!
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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Yeah, he's pretty bad, but he ain't got nothing on "Anonymous Coward". That guy usually makes dozens (hundreds!) of posts per story and 90% of them have absolutely nothing to say ;)
I want peace on earth and goodwill toward man.
We are the United States Government! We don't do that sort of thing.
/. 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.
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
"*whoosh*"
Wow, not only is that Anonymous Coward guy quite the prolific poster, he also makes fun of himself for failing to detect sarcasm.
You really should stay on your meds, Mr. AC.
Beauty is in the eye of the beerholder.
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.