A very important corporate governance case seems to be quietly underway in Delaware.  Yesterday, eBay and Craigslist took their troubles to the Chancery Court, with eBay, a minority shareholder in Craigslist, complaining that eBay was secretly diluted.  In rebuttal, Craigslist charges eBay with secretly making plans to compete with Craigslist.  And intermixed with these two discrete allegations seems to be a picture of what can happen in a close corporation when a majority camp and a minority camp do not have the same "vision thing."  Usually, we discuss in Business Associations the cases in which there are three individual shareholders, who begin life as friends or relatives or a mixture, and two end up against the other.  The Craigslist power dynamic seems the same, only the poor, oppressed shareholder would have to be. . . . .eBay?

This case has been coming down the river for awhile, and I posted on the pleadings back in May 2008.  That post tried to analyze the dilution of eBay's stake to just below 25%, making the supermajority voting and cumulative voting rights eBay had negotiated for ex ante not really mean that much.  It also goes into more detail about eBay's competitive activities. 

Stay tuned for exciting testimony from the powerful (eBay) and the very interesting (Craigslist) on the different philosophies of each shareholder.  The eBay folks seem dismayed to find out that the two Craigslist founders really didn't care about maximizing profit.  The Craigslist founder seem dismayed to find out that eBay wanted Craigslist to become, well, another eBay.  Fun stuff.

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