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Corporate Art Battle

  • Sotheby`s auction
April 18, 2014
Ana Bambic Kostov is an art historian with passion for contemporary art.

All of the interested parties are following the fight between Sotheby’s and Daniel Loeb with undivided attention. The very public discussion has been going on for some time, with each party trying to discredit the other in terms of being competent to lead the board  of one of the most prominent art dealing companies in the world. Issuing slamming reports on each other, Mr Loeb’s hedge fund Third Point and Sotheby’s appear to be in a serious feud with an ending nowhere in sight, since their arguments do not seem reconcilable. However, the entire dispute may be solved as soon as next week by the big investor advisory company Institutional Shareholder Services or I.S.S.

Loeb VS Sotheby's
Sotheby’s

Sotheby’s vs Loeb

In demonstration of their defiance to accept Daniel Loeb and his new new business strategy, the board of Sotheby’s issued a large document last week, emphasizing the peaks and good decisions of the current board as well as their competence in the matter of art business and management of a major auction house, pointing out the benefits for all the shareholders.

At the same time, the report was undermining Daniel Loeb’s competences as the supposed leader of Sotheby’s, as well as his company’s business moves. He  and his two nominees for the board were portrayed as a financial experts with insufficient experience in auction house, art and luxury management. The report also questioned Loeb’s experience as the board member, stating he was on the boards of different companies for a short while, while making bad investment decisions.The Sotheby’s document stated he negotiated a private transaction with Yahoo! to his own favor.

Loeb VS Sotheby's
Daniel Loeb

Loeb vs Sotheby’s

Daniel Loeb did not remain silent to the slander, and his Third Point hedge fund company issued a separate document presenting the reasons behind his strategy to the shareholders. He marked the Sotheby’s report as misleading and underlined that despite the numbers they showed, the company did underperform in the last years.

The Third Point report demonstrated that despite the fact Sotheby’s did sell more artwork than in their last peak of 2007, the auction house generated less revenue and consumed more funds to achieve this result. It argued the present board did not succeed to make constantly increasing returns for present shareholders, stating Daniel Loeb’s own company’s earnings of last year were 42% down comparing to 2007.

Blaming the poor performance on bad management, it was argued the current board owns less than 1% of Sotheby’s shares, while Third Point hedge fund is its largest investor with almost 10% of the stock. Besides several other points made by Third Point against the Sotheby’s board report, the final one regarded Daniel Loeb’s expertise in the matter.

He was described as one of the leading modern and contemporary art collectors, recognized as one of the top 200 by ART News for 9 years. His collection was described as important, parly exhibited at MoMa in New York and other prominent museums, while Mr. Loeb is a trustee of MOCA in Los Angeles.

All of the information is available to shareholders via website put up by Mr. Loeb’s company.

Loeb VS Sotheby's
Third Point Re

The Outcome

The fight between Daniel Loeb and Sotheby’s is constantly heating up, as we anxiously await the outcome. However, the culmination of the feud is yet to happen, since Sotheby’s yearly meeting is scheduled for May 6, only a few weeks away.Perhaps the I.S.S. will reach some kind of a Solomonic judgement, but in any case it will be interesting to see the outcome of this gargantuan squabble.