In the latest sign of trouble at Sotheby’s, artnet News reported that the company’s second-quarter report displayed a significant drop in private sales. (As opposed to public auctions, in a private sale, Sotheby’s is consigned a work of art and then privately approaches individuals about buying the work.) For the first half of 2014, Sotheby’s made $294 million in private sales, as compared with $561 million over the same period in 2013. That’s a 48 percentage point drop.
The climate at Sotheby’s has been shaky since last fall, when the auction house began a seven-month legal battle with activist investor Daniel Loeb. The battle began when Sotheby’s attempted to block Loeb’s hedge-fund, Third Point, from boosting its share of the company to 20 percent. The fighting only came to a close when, in May, Sotheby’s agreed to appoint Loeb and two others to their Board of Directors, amongst other conditions. But in the lengthy process, as also revealed in the company’s second-quarter report, Sotheby’s spent more than $24 million on lawyers and other expenses.
Amidst these economic and legal turmoils, Sotheby’s has been undergoing an internal restructuring. In July, it was announced that some of the auction house’s departments would undergo “modest” layoffs (the exact number was not reported). In a press release, Executive Vice President and Chief Financial Officer Patrick McClymont stated that the goal of the restructuring is to “achieve cost savings” while encouraging growth in other areas of the company. This follows the higher profile resignation of “Seller of the Century” Tobias Meyer at the end of last year.
Not all of the news is bad at Sotheby’s. The same August 8, 2014 SEC filing indicated that auction sales for the first half of 2014 had increased by 24 percent to $2.7 billion, compared to $2.2 billion for the first half of 2013. And while the earnings from private sales are down by nearly half, the actual number of private sales increased by 40 percent. So, what this means is that Sotheby’s has sold more works privately in 2014, just for smaller amounts of money. Given this, Sotheby’s is apparently optimistic: In a conference call with investors, Chief Executive Officer William Ruprecht told investors “I don’t see any thunderclouds here.” But with an eight percent drop in stock following the announcement of Sotheby’s quarterly report, thunderclouds might be closer than Ruprecht realizes.