This is sort of unexpected… It looks like Ebay is trying to sue Craigslist over some kind of dilution of share value. Ebay is a minority shareholder in Craigslist (not that minority though, owning 28%).

I’m sure the execs at Ebay have been fairly jealous of Craigslist, in that they have an equal market share in the selling of aftermarket goods online with almost none of the overhead that Ebay has, while still managing to make a respectable profit with hardly any cost to the users.

Ebay tried to copy Craigslist a while back by creating a similar site called kijiji.com, besides being nearly impossible to remember, has failed almost entirely. I think they fail to realize the reason why Craigslist is so popular, being that it is part of west coast culture and has been for many years. Posting classified adds online isn’t a revolutionary concept, and there really isn’t much need for anything more complicated than Craigslist for most things.

Some people on Slashdot had some insightful comments on this.

Luyseyal wrote:
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.

This is an interesting strategy… but kind of unethical though don’t you think?

Drhamad wrote:

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.

Looks like trouble in paradise.

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