EBay Vs. Craigslist: The Diluting Details

I was right. The issue in the Ebay vs Craiglist list -- essentially Ebay suing itself -- was a poison pill (among other things) instituted in clandestine fashion by the kids at Craiglist to protect themselves, as they saw it, from big, bad Ebay.

See the details from the WSJ last night:

For instance, as an "inducement" to convince eBay to enter into a new "right of first refusal" agreement, Messrs. Newmark and Buckmaster 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 complaint.

Both of the directors immediately agreed to the "right of first refusal" and received "reorganization shares" which diluted eBay's stake by 13% to 24.85% of the outstanding shares. EBay also said it lost certain rights when its ownership stake fell below the 25% threshold such as the ability to elect a director if three were up for election.

Both men also initiated a "poison pill" provision that deters eBay from selling its minority stake to anyone other than the defendants or Craigslist. "The only effect of this plan is to make Newmark, Buckmaster, or the Company they control the only possible acquirers of eBay's shares," eBay's complaint alleges.

On Jan. 3, Messrs. Newmark and Buckmaster disclosed the previous and other related transactions such as charter and bylaw amendments to eBay in a letter, but only after those transactions had been executed, eBay alleged. "Thus eBay had already been diluted under the Dilutive Issuance and stripped of important minority protections before it received any notice of the Transactions," the lawsuit states.

Comments

[phil dewey]

Craigslist is about to become Megslist. Oh, wait...

[whoiskiddingwho]

So: It is fine for eBay to make use of the fact that it is a big company and not consult the people who have invested money, sweat, and time to make their own business a success on eBay when ebay wants to do so and make changes. Yet, if another company does exactly the same thing when ebay is on the receiving end it cries wolf. Karma, a wonderful thing! Long live CL AND the principles they stand for. I am sure, in the court of public opinion ebay is already a "has been" due to their constant smoke screens when all they are concerned about is shareholder opinion winning stats to hoodwink the analysts and their own bottom line. All they have managed to do with this law suit is to reinforce the low public opinion.

[Dinah Balk]

Way to go Craigs List! It's about time someone stood up and said NO to eBay because eBay is nothing more than an infectious virus that needs a good shot of antibiotics.

My best wishes to you in defending this suit.

[User 186708]

Interesting how the public opinion immediately sees this as a case of the little guy vs. corporate America. Ultimately, the boys at Craigslist conducted themselves in an immoral manner. I have no issues with what they tried to do in order to protect their creation. But rules are rules, and advance notice should have been given to eBay prior to diluting the shares.

Responding to whoiskiddingwho, the difference is that when eBay makes a change to their product the sellers are impacted... not their shareholders.

[RainyDayInterns]

We had made the following observations after an odd little encounter this past week on Craigslist :-)

www.rainydaymagazine.c...