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They say a true poison pill is used to prevent a public company from
being taken over, and they argue that that can't possibly happen in
this case because Jim and Craig control the company. All Craigslist
is really trying to do is prevent eBay from selling to someone other
than them.
My argument is that saying "poison pill," while not strictly correct,
is a lot easier than saying "a dilutive shareholders' rights agreement
that floods the company with cheap stock as a way of trying to prevent
someone from doing something involving the shares."
I'm just curious... how do you suppose ebay got more than 25% of craigslist? that wasn't Craig's / craigslist's story was it?
Delia
cent, but eBay has always claimed it was 28 per cent.
I think it would still be considered a "defensive measure" under Delaware law, however, meaning that it has to have a reasonable relation to the threat posed (meaning that the law recognizes that management can take measures to protect their positions).
It doesn't look like it really bears any relation to a threat at all, and I think it is also clearly a self-interested transaction. This situation really does demonstrate the "lock-in" problem faced by minority owners in private companies.
The thing is, they only had the 3 board members, which seemed to have gone down to 2 (Craig and Jim) at the time of the disputed transactions. Not having any independent directors on the board was not a good idea, in hindsight.
Even if they had just nominated a special independent committee for those transactions, that would have at least given them an argument that someone was looking out for the interests of the minority.