The complaint eBay filed against Craigslist has finally been unsealed and published (.pdf), and it's full of intrigue, power struggles, finger pointing and legalese.
Essentially, the drama boils down to this: An unknown investor sold off his or her stake in Craigslist to eBay back in 2004. All told, it was a 25 percent stake, which bought eBay a place on Craigslist's board. Problem is, there was a nasty little provision in the agreement, under which eBay lost rights of first refusal (to buy additional shares of Craigslist) if it engaged in competitive activity.
It was all theoretical until eBay actually launched an online classified service that competed with Craigslist in the United States.
Craigslist founder Craig Newmark and CEO Jim Buckmaster notified eBay that they no longer felt comfortable having the company as a shareholder, and perhaps they could find a new home for eBay's stake in the company.
EBay's former CEO Meg Whitman wrote back saying she was pleased as punch with the Craigslist investment, and oh, by the way, she'd love to buy the rest of the company whenever it was deemed "appropriate."
According to the complaint filed by eBay, Newmark and Buckmaster responded by holding "a series of clandestine meetings to ensure that eBay would not be able to elect a director" to the board and altered the corporate governance laws to protect Craigslist from an "unwelcome takeover."
The upshot: Buckmaster and Newmark reshuffled shares through a weird little arrangement they made with each other, which diluted eBay's stake just enough so that it fell below the 25 percent threshold, and as a result, eBay could not elect a director to the board.
But to really protect themselves, Newmark and Buckmaster also adopted a poison pill, which prevents eBay from selling its stake to a business or entity that is not controlled by or approved of by the Craigslist board.
Craigslist CEO Jim Buckmaster didn't say much on the matter, but on the Craigslist blog he implied eBay just couldn't handle the competitive relationship:
"Sadly, we have an uncomfortably conflicted shareholder in our midst, one that is obsessed with dominating online classifieds for the purpose of maximizing its own profits," Buckmaster wrote. "As those who know us best will recognize, every measure we have taken has been for the sake of protecting the long term well-being of the Craigslist community."
*Photo: *Flickr/InfoMoFo
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