Some details have come out on the eBay-Craigslist lawsuit
that was in the news last week
. Ebay has released its filings in the lawsuit, suggesting pretty much exactly what you'd expect, with a few exceptions. There was a clause in the original agreement between the two companies if one started competing with each other -- allowing the other to resell shares without a right of first refusal. When eBay brought Kijiji to the US, Craigslist began the process of exercising that provision. However, eBay quickly tried to separate anyone dealing with Kijiji from anyone dealing with Craigslist, pulling its representative off of Craigslist's board since he was tangentially working with Kijiji. It then tried to put a different board member in place -- choosing a recent eBay hire who had no knowledge or experience with Kijiji. eBay presented this idea to Craigslist, stating that it was keeping Kijiji completely separate from its work with Craigslist, while also hinting at the idea that eBay really, really, really would just prefer to buy Craigslist entirely. Craigslist does not appear to have responded (even to the newly proposed board member) and then
held a few board meetings without an eBay member present, added in a poison pill to dilute shares and then exercised the poison pill, pushing eBay below the 25% threshold, which it needed to put in place a board member.
The filings clearly only show eBay's side of things, so as such it's not surprising that, based on the facts presented, it does look like Craigslist took some questionable actions to get eBay off its board. Craigslist claims it will respond soon, which should be interesting. You can certainly understand where Craigslist is coming from (no one wants a competitor on its board) -- but the question is whether it went about shaking off eBay in a legitimate manner. From the facts presented so far, that's far from clear. The ability to dilute the shares was not a part of the original agreement (even if such competition happened). Behind closed doors issuing of additional shares raises a lot of questions -- no matter how well intentioned.