Classified ad Web site Craigslist is denying online auctioneer eBay's allegation that it unfairly diluted eBay's stake in it and says its board was acting to protect the company.

Craigslist, based in San Francisco, filed a response in Delaware's Court of Chancery on Thursday to the lawsuit eBay filed last month.

The filing says founder Craig Newmark and Chief Executive Jim Buckmaster did some of the things eBay sued over, like creating a new shareholder rights agreement. But it said those moves are protected by laws that give directors discretion to act in their company's best interest.

Craigslist filed a countersuit this week in state Superior Court in San Francisco alleging the online auctioneer broke state and federal antitrust laws.

San Jose, Calif.-based eBay, owns a 28 percent stake in Craigslist.