eBay sends the attack dogs on Craigslist

Craigslist is certainly a funky company. In light of its huge traffic numbers, it could easily post huge profits. Or, it could sell out for a big payday or even go public. Yet, such things seem to be anathema to the company – at least to its founder, Craig Newmark.

And now there's a big issue with eBay (NASDAQ: EBAY), which owns 28.4% of Craiglist. Apparently, the relationship has been somewhat rocky as is evident by the lawsuit announced last night. eBay is claiming that the board of Craigslist (which consists only of Newmark and the CEO, Jim Buckmaster) has attempted to water down the ownership position – to a mere 10%.

I can certainly understand Craigslist's actions. After all, eBay has its own classifieds service called Kijiji. But hey, in the tech world, such arrangements are nothing new. It's to be expected (and so are lawsuits).

Interestingly enough, Newmark is not being shy about things and has responded via his blog. According to him, the lawsuit is a surprise and he claims that eBay has "ulterior motives," which may involve a hostile takeover.

Really? Let's see, how many times has eBay launched a hostile deal? I can't remember. Plus, such a thing is nearly impossible for a minority shareholder to pull off (and, even more difficult if the ownership position has been heavily diluted).

Unfortunately, eBay's legal complaint was not disclosed (because of confidentiality reasons), but the venue is Delaware, which has lots of expertise in shareholder disputes and usually handles things fairly quickly.

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements. He also operates MergerBook.com.