Dan Loeb has taken his media campaign to shake up Sothebys (NYSE:BID) staid board of directors to a new level, launching a web site solely devoted to his aggressive activist communication tactics.
Launching dedicated web site targeting board not done every day
While launching a web site entirely devoted to one takeover target is not unique – activist fund manager Bill Ackman did it with Herbalife, Trian Fund Management’s Nelson Peltz built a site in his fight with PepsiCo and Loeb also did it with Yahoo – the activity is rare and signals the level of seriousness to which the battle has been taken.
The professionally developed web site includes categories such as “Sotheby’s Challenges,” “Benefits of Shareholder Representation,” and “Our Nominees” along with a button “how to vote.”
Sotheby’s challenges
The rotating panels under the primary categories contain entertaining if informative details. Under the Sotheby’s Challenges panel investors will find a graphical display highlighting the issues Loeb has with the auction house. “Despite management touting a ‘record year’ in 2013, Sotheby’s company health is not what the Company would lead you to believe,” the site notes, citing the fact that revenues are down, expenses are up, margins are lower and the company doesn’t have an online strategy. The site compares 2007 with 2013, where the value of art sold is not up enough to keep pace with inflation, revenue is actually down while expenses are higher to $597 million. Earnings per share is down to $1.88 from $3.25 in 2007.
Another rotating panel, Sotheby’s Poison Pill: A Relic of the 1980s takes web site visitors to a PDF press release challenging Sotheby’s, saying “Given their personal interests and miniscule shareholdings of Sotheby’s, the Board’s actions – disenfranchising its owners who may wish to acquire a more significant stake – come as no surprise. We hope this will be the Ruprecht Board’s final snub to its shareholders.”
Loeb’s arguments
Loeb makes the argument that while the general market environment for high end auctions has improved, Sothebys (NYSE:BID) has failed to properly capitalize on these opportunities. “Sothebys has lost market share in highly profitable areas like Contemporary Art while its margins have badly deteriorated,” Loeb wrote. “We believe the Company’s slide is a consequence of failed leadership by a Board of Directors who collectively own a scant 0.87% stake in the Company. Their lack of ‘skin in the game’ has led to a dysfunctional corporate culture overly focused on short-term metrics such as auction volumes at the expense of long-term investment…”
As previously reported in ValueWalk, citing the “consequences of poor corporate governance and malfunctioning board processes,” Loeb pointed out that “Sotheby’s sorely lacks innovation and creativity at its most senior levels and requires an infusion of leadership, accountability and transparency.”
