Why Craig Newmark had better not piss off Jim Buckmaster
eBay's lawsuit against Craigslist, alleging that founder Craig Newmark and CEO Jim Buckmaster conspired to squeeze eBay out of the company, is fascinating for many reasons. It reveals Buckmaster and Newmark's naked greed: They issued shares of the company to themselves to increase their stakes and decrease eBay's.But it also shows how tight the two have been with Craigslist's workers. eBay owns, or owned 28.4 percent of the company, a stake acquired from early Craigslist employee Philip Knowlton. Knowlton sold his shares in part because Buckmaster and Newmark were trying to squeeze him out, too. (Are you beginning to see a pattern?) The two, acting as Craigslist's board of directors, issued themselves one new share for every five they already owned, a move which pushed eBay's ownership stake down to 24.85 percent — a level which, among other things, eliminated eBay's ability to elect a director for the company. Do the math, and it becomes clear that Craigslist's other shareholders — presumably its employees — own about 3.3 percent of the company. That's a miserably small portion of equity to give employees of a tech startup; normally, about 20 percent of a company's equity is reserved for employees.
But Newmark and Buckmaster have always operated Craigslist more as their private money machine than a real company. That they issued shares to themselves without discussing the matter with eBay, a major shareholder, is merely typical for them.
Here's one more thing that's interesting. A source familiar with Craigslist's stock ownership told me that, of the shares left over after eBay's stake, Newmark owned roughly 60 percent of the remaining shares, and Buckmaster 40 percent. That means Newmark's owns 41 percent of Craigslist, and Buckmaster 27 percent. Here's a disturbing thought: If Buckmaster were ever to switch his loyalties, he and eBay combined own enough of the company to outvote Newmark.
The two appear utterly sympatico, so a Buckmaster defection seems unlikely. But Buckmaster has taken the lead in Craigslist's dealings with eBay. The auction giant, so far, has been the target of Buckmaster's Machiavellian scheming. But he is the swing vote. If Buckmaster turned against Newmark, Craigslist would no longer be Craig's.