By Katya Wachtel and Svea Herbst-Bayliss
NEW YORK, Nov 14 (Reuters) – Hedge funds including Eton Park
Capital Management and Ellington Management Group took new
positions in Sotheby’s during the third quarter, joining
activist investor Daniel Loeb as he pushes for change at the
269-year-old auction house.
Hedge fund managers have long been players in the world of
high-end art, buying and hanging Picassos and Warhols on the
walls of their homes and offices. But now the industry is
seeking to cash in on another part of the art market.
Eton Park, founded by Eric Mindich, opened a large stake of
almost 2 million shares, while Ellington, founded by Michael
Vranos, scooped up 71,500 shares, according to regulatory
filings with Securities and Exchange Commission.
During June and August Mick McGuire’s Marcato Capital
Management and Loeb’s Third Point made 13-D filings saying they
now owned big stakes and intended to shake things up. Separately
they have been pushing the company to get rid of Chief
Executive William Ruprecht, overhaul its strategy and better
manage its balance sheet.
Since the activist investors began their campaign, Sotheby’s
stock price has climbed roughly 20 percent, upside that Eton
Park and Ellington may have captured depending on when they
bought their shares.
The quarterly disclosures of manager stock holdings are
backward looking and come out 45 days after the end of each
quarter, so it is unclear if the managers own Sotheby’s stock in
the same amount today.
Third Point is the largest shareholder in the New York
City-based auctioneer, with a 9.3 percent stake, and has been
the more vocal agitator. Loeb penned a scathing letter to
Ruprecht in October criticizing the company’s approach to
auctions, private sales and Internet sales, as well as
excessive spending and waste at the expense of shareholders.
Loeb cited an “extravagant lunch and dinner” at Blue Hill at
Stone Barns restaurant in New York state “where Sotheby’s senior
management feasted on organic delicacies.”
A source familiar with the situation, said the meeting was a
two-day management retreat for about 40 to 50 senior-level
officers and art specialists and that Loeb’s “multiple hundreds
of thousands of dollars” cost estimate was inflated.
Sotheby’s and Ruprecht are fighting back, pointing to a
rising stock price, blockbuster sales such as last year’s $120
million auction of Edvard Munch’s “The Scream,” and this week’s
records set for Andy Warhol’s work and its recent undertaking of
a review of its financial strategies.
On Wednesday Sotheby’s smashed records as it held the
biggest auction in its history, led by a record-setting $105
million work by Warhol. Embattled hedge fund
manager Steven A. Cohen had a number of pieces from his
collection up for sale at the auction, according to reports in
the New York Times.
Sotheby’s in October adopted a so-called poison pill
strategy to stop a hostile attempt to take over or increase
control of the company.
