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Grass Hopper
Grass Hopper
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Third Point's Letter to Sotheby's Stockholders

April 04, 2014 | About:


Third Point (NYSE: TPRE; LSE: TPOU LN) Urges Sotheby’s Stockholders to Support Its Slate of Independent and Highly Qualified Nominees: Vote the White Proxy Card Today!

NEW YORK, NEW YORK, April 4, 2014: Third Point released this letter to its fellow Sotheby’s shareholders, calling on them to vote for the Shareholder Slate Director Nominees Daniel S. Loeb, Harry J. Wilson, and Olivier Reza at this year’s Annual Meeting:

Dear Fellow Shareholders:

Sotheby’s (the “Company”) is a leading brand in the art and collectibles market. Despite strong global tailwinds from rising art prices and increasing consumption of luxury goods, Sotheby’s has lost market share in highly profitable areas like Contemporary Art while its margins have badly deteriorated. 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 in key areas including: talent development and securing key relationships in the art world; maintaining and modernizing the entry and exhibition spaces at its headquarters; and technological infrastructure, both in terms of digital presence and database management. Most recently, Sotheby’s Board has spent shareholders’ money on legal shenanigans designed to disenfranchise them rather than on developing and articulating a clear long‐term growth strategy. Third Point’s intention is to reinvigorate the Board with our Shareholder Slate –Daniel S. Loeb, Harry J. Wilson, and Olivier Reza –and to restore Sotheby’s to meet its substantial potential.

Sotheby’s current challenges are well‐known consequences of poor corporate governance and malfunctioning board processes. Our view is that Sotheby’s sorely lacks innovation and creativity at its most senior levels and requires an infusion of leadership, accountability and transparency. The Company must fill the void at the top that has created a listless corporate culture characterized by disregard for shareholder interests, irresponsible cost expenditures, and many missed opportunities for growth.

Our diagnoses are not merely speculative. For example, Sotheby’s has repeatedly referred to 2013 as a “record year”. In fact, this statement is misleading and demonstrates the risk of having a Board asleep at the switch and disengaged from measures of profitability that drive shareholder value. While relative to Sotheby’s prior peak in 2007, the Company sold a greater dollar value of art, the much more meaningful metric is that it generated less revenue and spent more money to do so. The bottom line is that earnings per share were down 40% versus the prior peak. What does it say about a Board of Directors that trumpets a “record year” when profits are not even close? Why is the Board not asking itself the question many shareholders have –what is wrong with this picture?

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