Daniel Loeb Wants Sotheby’s CEO Out
Daniel Loeb is known for his collection of contemporary art. In 2009, he sold a blue-and-pink Jeff Koons egg for a tidy $5.5 million. That’s some serious collecting. So it was no surprise in August when his Third Point activist hedge fund firm targeted Sotheby’s (NYSE: BID) auction house, amassing a 5.7 percent stake in the company. According to a filing with the SEC, Third Point spent $156.7 million on the holding. The firm’s stake in the company now sits at 9.29 percent.
Fast forward two months and Loeb is now calling for Sotheby’s CEO William Ruprecht to step down. Surprising that it took so long for Loeb to weigh in on Ruprecht. He is not known for his gentle style when it comes to CEOs; of any company. This morning Loeb filed a letter with the Securities and Exchange Commission leveraging his firm’s status as majority shareholder in the auction house. A major bone of contention for the contemporary art collector is one of modern art. What else? Well, there is more to it, but it’s not surprising he would mention it.
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.”
In his usual more than direct style, Loeb confronted Ruprecht on his alleged disregard for shareholders and an overly extravagant lifestyle funded by a generous pay package.
“Emblematic of the Company’s misalignment with shareholder interests are both your own generous pay package and scant stock holdings by virtually all Board members. Third Point’s current stake represents nearly 10 times the number of fully-vested shares held by Sotheby’s directors and executive officers. Your personal holding of 152,683 shares, representing a mere 0.22% interest, is particularly noteworthy because you have been an employee of the Company since 1980 and its CEO since 2000.
In sharp contrast to your limited stock holdings is a generous package of cash pay, perquisites, and other compensation. We see little evidence justifying your 2012 total compensation of $6,300,399 in both salary and PSU awards valued at over $4 million, seemingly based on a mysterious target not disclosed in any of the Company’s public filings.”
Not exactly a love letter.
Loeb also generously offered to join the board in order to implement changes that he feels will be best for Sotheby’s. His proposals include private and Internet sales, revamping auctions, expanding the auction house’s global presence, and developing the Sotheby’s brand.
As for Sotheby’s, it’s quietly plugging along with shares reaching a 52-week high today of $50.28, after the letter was filed. Sotheby’s and Ruprecht have yet to comment. Third Point says that the letter stands as their statement on the matter.
Disclosure: The author has no position in the stocks mentioned in this article, and does not intend to initiate any position in the next 48 hours.
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