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It’s Going To Take A Lot More Than A $325 Million Buyback For This Hedge Fund Manager To Start Taking Sotheby’s SeriouslyBy Bess Levin
Back in October, hedge fund manager Dan Loeb sat down at his desk to pen a letter to auction house Sotheby’s, wherein he informed management that, among other things, they don’t know dick about contemporary art. The Third Point founder went on to list the many ways Sotheby’s had failed shareholders, including “egregious examples of waste,” like a lunch at Blue Hill that cost “multiple hundreds of thousands of dollars,” lost ground to rival Christie’s, its sliding operation margin, and, finally, the continued employment of CEO William Ruprecht, to whom the letter was addressed. Naturally, Loeb offered his services re: fixing the place, writing that he would be happy to join the board and help recruit a few other directors who would come with the requisite “experience increasing shareholder value” and would generally know what they hell they were doing, unlike some people (no names: Bill Ruprecht).
After initially responding to Loeb’s letter by describing its contents as “incendiary and baseless,” and adopting a poison pill to protect itself, Sotheby’s announced yesterday that it would “return $325 million to investors this year through a special dividend and share repurchase program.”
Did this please Loeb? The hedge fund manager declined to comment, so it’s hard to say. Ruprecht is still employed, so he’s probably not 100% placated, but perhaps the $325 million makes him a little more reticent to release the hounds. You know who’s decidedly not pleased? A guy named Mick McGuire, who’s not prepared to start taking Sotheby’s seriously until they start talking buybacks with a capital B, for billion.
The initial reaction to the auction house’s announcement was overwhelmingly positive, with the Stock rallying more than 6% in pre-market trading. Indeed, shares in Sotheby’s have been flying high over the past 12 months, leaving other luxury names like Bernard Arnault’s LVMH Moet Hennessy and Coach, as well as the S&P 500, in the dust. The stock has actually been among the best in class, trading alongside names like Michael Kors and Tiffany’s. The day’s gains were quickly reversed, though, as the stock fell even lower than the broader market. Marcato’s McGuire’s response, which called for management to return $1 billion to shareholders this year using earnings from 2013 and 2013, capital from their financial services unit, and real estate transactions, definitely helped the bearishness.
Get back to him when you’ve got something real to discuss.