This is a family in need of an intervention.
Online auction site EBay has sued Craigslist, the online classifieds giant in which it holds an ownership stake, claiming that Craigslist tried to dilute its control.
The San Jose-based eBay alleged in a lawsuit filed Tuesday that the directors of Craigslist took “unilateral actions” in January to dilute eBay’s 28.4 percent stake by more than 10 percent.
The suit names Craigslist’s founder Craig Newmark and Chief Executive Jim Buckmaster, who describes himself on Craiglist’s website as “anti-establishment.” Newmark and Buckmaster are the only members of the board of directors of the San Francisco-based Craigslist, which is one of the top 10 Web companies in the United States.
Craigslist defended itself against the assertions last night. In a post on its blog, under the heading “Tainted Love,” it said it was “surprised and disappointed” by eBay’s action.
“Coming from a shareholder that views Craigslist as a prime competitor, filing suit without so much as mentioning these assertions beforehand seems unethical, and hints at ulterior motives,” the post stated.
“eBay has absolutely no reason to feel threatened here - unless of course they’re contemplating a hostile takeover of Craigslist, or the sale of eBay’s stake in Craigslist to an unfriendly party. For our part, we have always treated eBay very fairly as a minority shareholder, and plan to continue doing so, despite this unfortunate development.”
EBay’s suit, filed on Tuesday under seal, asked a Delaware Chancery Court to rescind unspecified actions to protect eBay’s stockholders.
“The recent actions by the Craigslist directors have disadvantaged eBay and its investment in Craigslist,” Michael Jacobson, eBay’s senior vice president and general counsel, said in a written statement.
“Since negotiating our investment with Craigslist’s board in 2004, we have acted openly and in good faith as aminority shareholder, so we were surprised by these recent unilateral actions,” Jacobson said. Craigslist could not be reached for comment.
Certainly, the business philosophies of the two companies could not be more different:
EBay, which was created by Pierre Omidyar in 1995 to sell Pez dispensers and other collectibles, made $7.7 billion in revenues last year; Craigslist’s revenue is estimated at $25 million - a fraction of what it might produce if it charged more for its listings. (Craigslist is privately held and does not release revenues.)
Most of Craigslist’s listings are free. In seven of its 450 markets, Craigslist charges a fee of $25 ($75 in San Francisco) for a job listing. It also charges $10 for real estate listings in New York.
“We figure that we’re making enough money for all of our needs,” Buckmaster told the Mesh Web conference in Toronto last year. “Running the site the way we do is a lot more fun than worrying about making more and more money.”
EBay, meanwhile, has unveiled numerous rival advertising sites like Kijiji.com to compete with Craigslist.
While Omidyar, and Josh Silverman, the head of eBay’s Skype unit, have sat on the Craigslist board at different times, eBay said it no longer had a seat on the board.
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