Back in 2004, eBay paid $32 million for 28.4% of Craigslist, hoping to eventually acquire the company, but the relationship between the companies turned sour when eBay launched a site called Kijiji.com, which closely resembled Craigslist.
Craigslist sued eBay, claiming that it wrongfully used information it obtained from Craigslist to build Kijiji. eBay then sued Craigslist, claiming that Craigslist altered its stock structure to devalue eBay's stake in the company to 25% and deny eBay a seat on its board.
The two companies are finally putting this all in the past and severing ties.
Coincidentally, eBay CEO-designee Devin Wenig tweeted that eBay will be investing in and rapidly scaling its Craigslist competitor Close 5.
"The sale of the Craigslist stake looks like pre-split clean up to me," Wedbush analyst Gil Luria said.
eBay is preparing to spin off PayPal in the third quarter, and Luria believes that this sale is simply one of the ways in which eBay is readying itself for the transaction. Another part of the preparation includes eBay looking to sell off its e-commerce solutions business, Enterprise, with the end result being a standalone Marketplace business at eBay.
"I see the dispositions as being part of the strategy of focusing on the core business, generating cash and returning some of it to shareholders," Luria said. "I doubt the sum eBay is receiving is material, otherwise they would be disclosing it. We will likely find out how much they get when they file their quarterly SEC filing."
Needham & Company analyst Kerry Rice agreed that the Craigslist stake was a distraction from eBay's core focus right now. "I think it's a good thing for eBay to focus on its core business, I am not sure the company is gaining any benefits by owning a piece of Craigslist," he said.