Daniel Loeb sees Sotheby’s as a possible target

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Daniel Loeb top 200 art collectors in the world  / Getty

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/ By Gali Raz /

Daniel Loeb, one of the most active investors on Wall Street has reportedly recently invested more than $150 million in the shares of publicly listed art auctioneers Sothebys, through his hedge fund Third Point and as well filing with the U.S. Securities and Exchange Commission (SEC). According to details of the filing, which are now public, Loeb is in the process of setting up a meeting with the management team at Sotheby’s.

As is common practice with activist investors such as Third Point, such an initial share purchase as well as the public declaration of his willingness to meet with the management, can be generally interpreted that Loeb may be looking to help lead a change in strategy for the company, which has been lagging behind in its industry in recent years.

Investment analysts suspect that Sotheby’s, headed by William Ruprecht, who has been CEO of the company for the last 13 years, came up on Loeb’s radar as the company has stagnated a little since Ruprecht took the helm. He had come in to office when his predecessor Diana Brooks left the company under something of a cloud, after being involved in a price-fixing scandal with their principal rivals, Christies.

Ironically in the last three years it has been Christie who has stolen a lot of Sotheby’s thunder, with industry onlookers acknowledging that London-based Christies has made a much smoother transition into the digital age.

Sotheby’s income for 2012 was still a respectable $768.5 million with most of it being generated through auction sales, where they specialize in marketing fine art, rare items of jewelry and even collections of fine wines. Sothebys continues to hold the World record for auctioning of a single work of art – the $119.9 million paid for Edvard Munch’s “The Scream”, also during 2012.

In response to the news that Third Point had taken a significant shareholding, the company issued a press release stating that the Sotheby’s board of directors and management team are committed to building long-lasting value for all of Sotheby’s shareholders, and continue to welcome investment in the company.
On the news of Loeb’s investment, shares in Sotheby rose by 3 percent on the New York Stock Exchange closing at $47.21. Interestingly the company has been doing quite well in the market having gained 49 percent within the past 12 months alone.

Daniel Loeb is regarded as being one of the shrewdest of the activist investors, as well as having his finger very much on the pulse. That means that he will likely be well aware that one of his rivals, Nelson Peltz, has also been acquiring shares in Sotheby’s through his Trian Fund Management company. Peltz is reputed to have acquired around two million Sotheby shares in the course of the last three months equivalent to a three percent stake in the company.

At this stage Loeb is liable to be not too concerned as it is common practice for activist investors to acquire a reporting threshold of a minimum of five percent of a company’s stock, after which they can flag their intent to seek changes to boost equity returns by disclosing their holding in a 13D filing with the SEC.

Although nothing is certain, another theory was exemplified by John Paulson who after acquiring a number of shares in Steinway Musical Instruments Inc. went on to become the principal shareholder in the long-established piano maker laying out around $500 million to do so, even in the face of strong competition. He just loves pianos he said.

Daniel Loeb might well be thinking of following suit, have a reputation as an avid art collector, specializing in postwar and contemporary works. Loeb was recently ranked as being among the top 200 art collectors in the world for 2012 by the renowned Art News magazine.

Daniel Loeb may well be thinking of following suit, have a reputation as an avid collector, specializing in postwar and contemporary works. Loeb was recently ranked as being among the top 200 art collectors in the world for 2012 by then renowned Art News magazine.

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