Dan Loeb wants to shake up management at Sotheby's. But, the company is fighting back.
When Dan Loeb gets involved with a company, he likes to go all-out. Now the activist investor is setting his sights on auction house Sotheby’s.
Loeb’s $13 billion Third Point LLC is Sotheby’s largest shareholder, owning 6.35 million shares or 9.3% of the company. And, he’s not happy with management.
In a letter this past Wednesday to Sotheby’s CEO William Ruprecht, Loeb attacked Sotheby’s top brass, saying, “We remain concerned about its leadership, shareholder misalignment, strategic direction, and Board governance.”
While Loeb praised Ruprecht, saying the CEO was “an able steward for the Company following both the price fixing scandal in 2000 and the financial crisis in 2008”, the fund manager then went on to criticize Sotheby’s head for not paying enough attention to contemporary and modern art, not having an Internet strategy, and falling behind archrival Christie’s in markets like China and the Middle East. Ruprecht is presently in Hong Kong on behalf of the company.
Loeb is also not a fan of Sotheby’s management’s dining choices, writing:
“In the course of our investigation into the Company’s business practices, we came across numerous anecdotes of waste. Typical of the egregious examples was a story we heard of a recent offsite meeting consisting of an extravagant lunch and dinner at a famous “farm-to-table” New York area restaurant where Sotheby’s senior management feasted on organic delicacies and imbibed vintage wines at a cost to shareholders of multiple hundreds of thousands of dollars. We acknowledge that Sotheby’s is a luxury brand, but there appears to be some confusion – this does not entitle senior management to live a life of luxury at the expense of shareholders.”
The solution to all this, says Loeb, is for Ruprecht to resign as CEO, Chairman, and President of Sotheby’s. Loeb wants all three roles to be separated by Rurprecht’s future successors.
Sotheby’s isn’t taking Loeb’s letter sitting down (at a swanky restaurant table, of course). Its board of directors implemented a “poison pill”, a plan which would make it nearly impossible for a takeover by a single investor. Not coincidentally, Sotheby’s poison pill kicks in once an active investor owns more than 10% of shares.
Since the start of 2013, Sotheby’s stock is up over 50%. Loeb’s Third Point has given investors a 15% return in the first eight months of the year, underperforming the S&P 500 Index’s 16.1% during that time period.
This isn’t the first time Loeb made his disagreements with the management of a company public. Earlier this year, he called on Sony to spin off its entertainment division, raising the ire of actor/director George Clooney. Loeb’s plan was ultimately rejected by the Japanese-based company.
Is Loeb right? And, is Sotheby’s worth your bid?
Looking at the company from the fundamentals’ perspective is Gina Sanchez, founder of Chantico Global. Checking the charts is Jeff Tomasulo, managing partner at Belpointe's Alternative Investment Group.
Should you raise your paddle with Sotheby’s? Watch the video to see what the fundamentals and technicals have to say about that.
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