In re eBay, Inc. Shareholders Litigation
Delaware Court of Chancery
2004 WL 253521 (Del. Ch.)
Goldman Sachs was hired to underwrite the initial public offering of eBay stock. In doing so, Goldman Sachs allocated shares of the initial eBay stock to eBay “insiders,” including members of eBay’s board of directors. Shareholders of eBay (plaintiffs) brought suit against the directors (defendants), alleging that the directors’ acceptance of the private allocations violated their fiduciary duty to eBay by usurping eBay’s corporate opportunity in that eBay could and would have purchased the stock that was allocated. It is undisputed that eBay could afford the stock financially, that it was in the business of investing in securities, and that eBay was never given an opportunity to turn down the allocations. The directors filed a motion to dismiss the claim.
Rule of Law
Holding and Reasoning (Memorandum)