By Katya Wachtel
Oct 2 Activist investor Daniel Loeb's Third
Point LLC has raised its stake in Sotheby's and called
for the resignation of the auctioneer's chief executive and
chairman on concerns about the company's leadership and
Loeb's roughly $13 billion fund, now Sotheby's largest
shareholder, with a 9.3 percent stake, said it would seek to
replace current CEO William Ruprecht once Loeb gains a seat on
the company's board, according to a letter disclosed in a
regulatory filing Wednesday.
"We are troubled by the company's chronically weak operating
margins and deteriorating competitive position relative to
Christie's, as evidenced by each of the contemporary and modern
art evening sales over the last several years," Third Point said
in the letter.
"We have concluded that Sotheby's malaise is a result of a
lack of leadership and strategic vision at its highest levels."
Loeb called for the positions of CEO and chairman to be
separated upon the departure of Ruprecht, who holds both
Third Point had raised its stake in Sotheby's from the 5.7
percent it owned as of Aug. 15.
In a written statement Sotheby's said it is making ongoing
efforts to improve the company's balance sheet, deliver
shareholder value and improve the cost of capital, including a
"comprehensive capital allocation review" that is already
Last month Sotheby's said it would review its capital
allocation strategy, leaving the door open to raising its
dividend and taking on debt, after activists Loeb, Nelson Peltz
and Mick McGuire revealed big stakes in the
"Today, rather than debating incendiary and baseless
comments, we are focused on serving our clients' needs during
this critical autumn sales season," the statement said. "We will
comment on the communication from Third Point at the appropriate
Sotheby's shares were up about 0.8 percent at $50.10 in
midday trading on the New York Stock Exchange. The stock has
risen almost 45 percent since the beginning of the year.
"Sotheby's trades on the auctions and supply as well as
what's going on in the art market," said Kristine Koerber, an
analyst at Discern. "They have made some management changes. The
stock has continued to migrate upward and it could be due to the
strong auction results recently or the activists' involvement."
Koerber, who has covered Sotheby's for several years, said
she had read the letter from Loeb and doesn't agree with
everything stated in it. She declined to comment further.
On Wednesday Loeb likened the 269-year-old auction house to
"an old master painting in desperate need of restoration." He
wants auctions, private and internet sales reinvigorated or
revamped, he said, and for the company to expand its global
footprint and "exploit the Sotheby's brand through adjacent
Loeb also criticized Sotheby's management for excessive
spending and waste at the expense of shareholders, citing an
"extravagant lunch and dinner at a famous 'farm-to-table' New
York-area restaurant where Sotheby's senior management feasted
on organic delicacies."
Third Point did not have any further comment on the letter.
Loeb is one of the hedge fund industry's most famous
managers, known as much for his solid returns as his acerbic and
colorful letters to corporate boards. In recent times Loeb has
focused his activist efforts on Yahoo Inc and Sony Corp