Silicon Alley Insider recently valued Craigslist at $5 billion.
The facts behind the EBay-Craigslist litigation:
April 30, 2008, 4:58 pm
EBay-Craigslist Fight Is About Kijiji and Control, Complaint Shows
By Brad Stone
Last week, eBay sued the classified advertising site Craigslist in a Delaware court. The suit received widespread coverage but its causes were opaque, since a copy of the complaint was not made public and the parties were not speaking publicly.
Until today. EBay’s complaint against Craigslist, its founder Craig Newmark and its chief executive Jim Buckmaster, has now become public and eBay is making it available online. The document seems to show that the two companies have been engaged in a battle over control triggered by Kijiji, eBay’s rival classified advertising site.
Here’s a quick synopsis of the 26-page complaint, some of which is redacted to protect information about the finances of Craigslist and its two primary shareholders.
In August 2004, eBay bought 28.4 percent of Craigslist. As part of that contract, the parties agreed that if eBay ever entered into the online classified advertising market and became a competitor, each side would no longer have a “right of first refusal” to acquire each other’s shares.
In 2005, eBay went into the classified ad business overseas, launching Kijiji.com. In 2007, eBay launched the site in the United States.
In June 2007, Craigslist notified eBay that it was engaging in competitive activity and that both parties had ceased being subject to the right of first refusal.
In July, eBay notified Craigslist that it was withdrawing Josh Silverman, now Skype’s chief executive, from the Craigslist board since he had worked on Kijiji. EBay tried to appoint Thomas Jeon, an eBay lawyer, to the Craigslist board, but Craigslist did not respond to the requests, according to the complaint.
In late July 2007, in an e-mail message to Jim Buckmaster, Meg Whitman said eBay had taken steps to “completely firewall” off Kijiji from its interest in Craigslist. She also reaffirmed eBay’s interest in buying all of Craigslist. “We would welcome the opportunity to acquire the remainder of Craiglist we do not already own whenever you and Craig feel it would be appropriate,” she wrote.
That triggered what appears to have been fear at Craigslist that the non-profit-minded company could somehow be subjected to a hostile takeover.
In October 2007, the two Craigslist directors began meeting with their lawyer on corporate governance issues, without eBay’s involvement.
On January 1, 2008, they reorganized the company’s stock structure, issuing one “reorganization” share of Craigslist stock for every five shares of common stock. That diluted eBay’s stock from 28.04 percent to 24.85 percent and, as specified in Craigslist’s bylaws, eBay lost its ability to elect a director.
Thus, the lawsuit.
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