When eBay bought the roughly 25% stake (turns out it was 28.4%), Newmark was quoted as saying: “[eBay and us] share the same moral compass, they’re good partners”.  I thought it was hogwash: either Craig was naive or delusional, possibly both.  eBay did not invest in Craigslist because they needed to share morality or determine which way was north.  They did it to get into the listings business, and when Craig pushed back, eBay launched Kijiji.

But if you read eBay’s version of the facts here, you would think eBay was the victim and Craig/Jim the devils:

In 2004, after negotiating the transaction with craigslist’s board, eBay acquired a minority ownership interest in craigslist of 28.4 percent.

In January 2008, however, 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.

“The recent actions by the craigslist directors have disadvantaged eBay and its investment in craigslist,” said Mike Jacobson, eBay Senior Vice President and General Counsel. “Since negotiating our investment with craigslist’s board in 2004, we have acted openly and in good faith as a minority shareholder, so we were surprised by these recent unilateral actions. We are asking the Delaware court to rescind these recent actions in order to protect eBay’s stockholders and preserve our investment.”

The matter will now be resolved in court… maybe Craig can take some of those millions and offer to buy ot eBay, what’s the alternative?  Raise PE or VC to do that… he’s idealistic, not crazy.

But jokes aside, in this bizarro world scenario:

eBay = VCs
Craigslist = entrepreneurs / company.

In the world as we know it, ’tis the VCs who try to reduce the holdings of entrepreneurs through term sheet fine print items and boardroom shenanigans, but in this case, the entrepreneurs are trying to pull a fast one (allegeldy) on the investors.

I think this is why some investors want control and why companies rarely invest as minority investors.