eBay issued a press release on Tuesday stating it has filed a lawsuit to challenge recent transactions implemented by Craigslist's board of directors, Craig Newmark and Jim Buckmaster. eBay said it was taking action to safeguard its four-year financial investment in the classifieds website.

Craigslist responded with a post on its blog titled, "Tainted Love," calling the lawsuit unfounded and claiming it came out of the blue. It also raised questions about eBay's motivation in filing the lawsuit.

We have always done our best to protect the well-being of craigslist and the craigslist community, and will continue to do so. Ebay has absolutely no reason to feel threatened - unless a hostile takeover of craigslist, or the sale of Ebay's stake in craigslist to an unfriendly party, is their ultimate goal. (In which case, they're out of luck!)

For our part, we have always treated Ebay very fairly as a minority shareholder, and plan to continue doing so, despite this unfortunate development.

While eBay has a stake in Craigslist, it also operates a number of its own classified websites, including Kijiji.com, which competes with Craigslist.

eBay had acquired its minority ownership interest in Craigslist in 2004 - eBay said 28.4 percent. (See Wall Street Journal article about the investment http://www.craigslist.org/about/press/ebay.stake.html).

In Tuesday's press release, eBay complained that in January of this year, Newmark and Buckmaster adopted measures that, "among other things, unfairly diluted eBay's economic interest in Craigslist by more than 10 percent. By taking these unilateral actions, eBay believes that Newmark and Buckmaster breached their fiduciary duties in violation of Delaware corporate law."

eBay said it is asking the Delaware court to rescind the recent actions in order to protect eBay's stockholders and preserve its investment. The complaint is being filed under seal because some of the information about Craigslist contained in the complaint is governed by confidentiality restrictions.

http://blog.craigslist.org/2008/04/tainted-love

http://news.ebay.com/releasedetail.cfm?ReleaseID=305980

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