Craigslist sued by part-owner eBay [Updated]

Updated with a blog post from Craigslist chief executive Jim Buckmaster, below the articleCraigslist, the lucrative online listings marketplace, is being sued by its part-owner, eBay, according to a number of reports.

EBay, the dominant marketplace property on the web, bought a 28.4 stake in privately-owned Craigslist in 2004 from an outgoing Craiglist executive. Since then, eBay has launched a competing listing service called Kijiji.

The lawsuit alleges that Craiglist founder Craig Newmark and chief executive Jim Buckmaster “unfairly diluted eBay’s economic interest in Craigslist by more than ten percent,” breaching their fiduciary duty according to Delaware corporate law. (Note: Craigslist, like most corporations, is incorporated in Delaware.)

Why? Some are speculating that alleged dilution could have been caused by Craigslist raising another funding round — which would be weird, because the company makes millions in profit each year.

We have a line out to get comment from Craigslist. We’ll update the post once we hear back.

UPDATED: Buckmaster responds on the company blog:

Ebay has filed suit against craigslist and its board of directors:

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

We are surprised and disappointed by Ebay’s unfounded allegations, which came to us out of the blue, without any attempt to engage in a dialogue with us.

Coming from a shareholder that views craigslist as a prime competitor, filing suit without so much as mentioning these assertions beforehand feels unethical somehow, and hints at ulterior motives.

Ensuring the future well-being of craigslist and the craigslist community is admittedly very important to us. But Ebay has absolutely no reason to feel threatened here — unless of course they’re contemplating a hostile takeover of craigslist, or the sale of Ebay’s stake in craigslist to an unfriendly party. (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.