eBay publicized the complaint it recently filed against Craigslist in Delaware’s Couty of Chancery. It’s all about the lucrative listings market.
A public copy of the eBay complaint, edited to redact certain portions at the request of Craigslist, became available Wednesday. “eBay…takes no position at this time on the propriety of any of Defendants’ redactions,” eBay said of those edits.
eBay claimed the two directors for Craigslist, Jim Buckmaster and Craig Newmark, made certain transactions that benefited them to eBay’s detriment. The actual numbers regarding the number of shares and percentages have been redacted out of the complaint.
As part of the agreement that delivered part of Craigslist to eBay, any competitive activity by either side would cause that side to lose certain rights. With eBay bringing its Kijiji listings site to the United States, it seems Craigslist considered this competitive activity.
By the agreement, Craigslist can sell eBay’s “minority, non-control interest” when this takes place. Craigslist became uncomfortable with eBay’s Kijiji forays into the US; in July 2007, they asked eBay CEO Meg Whitman about repurchasing its Craigslist interest, or otherwise finding “a new home for these shares.”
Whitman responded by saying eBay would like to acquire the rest of Craigslist whenever Buckmaster and Newmark felt it would be appropriate. Ebay cited industry commentary about Craigslist, pegging its potential value of several billion dollars.
eBay then alleges that in January 2008, Buckmaster and Newmark began to dilute eBay’s stake in the site. Changes made to Craigslist’s bylaws angered eBay, which called the right of first refusal they adopted “a thinly disguised effort to strip eBay” of its right to sell its shares to any other potential buyer.
Court of Chancery will have to wrestle with the competitive interest terms of the agreement between the two sides. If they agree that Kijiji’s operations triggered those terms once eBay opened the site here, eBay stands to lose a lot more of its Craigslist interest.
