Filed under: Deals, Law, eBay (EBAY)
On the internet auction company eBay (NASDAQ:EBAY) owns just over 28% of classifieds company craigslist. eBay purchased in during 2004.
Now, eBay is suing craigslist and its management for diluting its share in craigslist, something it contends the classifieds company can not do. “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 according to The New York Times.
All of this is a great mystery. eBay has not stated what it paid for its stake. It has also not disclosed why it thinks craigslist has taken actions to cause dilution.
Why did eBay disclose the lawsuit but insist that its details be sealed? Craigslist is a private company, so there was no need to let the public know about the move.
One of several things might be happening. eBay has no control over craigslist management. Craigslist is one of the largest websites on the internet. eBay might want more of a state in how the company is operated and how it makes money. Many listings on craigslist are free. eBay may believe it will never make money on its investment if craigslist does not become more aggressive in its pricing.
The other possible motive is that eBay may want to try to force craigslist into a sale, with eBay being the acquirer. The auction firm needs something to jump-start its US business. A judgment against the classified company, especially if it includes any money damages, might open the door for eBay to move in.
Douglas A. McIntyre is an editor at 247wallst.com
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