Tuesday, April 22, 2008

Reblog: When Meg Sued Craig: Ebay vs. Craigslist

Reblogging from Paul Kedrosky the short NY Times article on the lawsuit that eBay filed against Craigslist. This was bound to end in ugliness. A while back, eBay bought about 25% of Craigslist from an employee who had been given ownership but wanted out. That employee cashed out and eBay has been hovering over Craigslist ever since.

From the article, it sounds like some type of dilution scheme was approved and implemented by Craig and his compadre. One mechanism could have been a "poison pill" which allows one group of shareholders to effectively dilute down an unwanted outsider by issuing tons of shares. Poison pills are typically used to discourage a hostile takeover. The weird thing in this situation is that eBay has been a shareholder for a while. They should have some governance visibility into Craigslist. Maybe they saw it coming but couldn't stop it and had to resort to a lawsuit.

Can't wait to see this play out.