275-year-old auction house Sotheby’s has been acquired by businessman Patrick Drahi. The auction house goes private after 31 years as a public entity. The art world waits to find out what this means as the decision may considerably affect the business of art trade.
Sotheby’s auction house, the fourth-oldest auction house in the world, has 90 locations in more than 40 countries and has sold art worth $6.4 billion around the world. Now, after 31 years of public dealings, Sotheby’s once again finds itself in private hands. Sotheby’s CEO Tad Smith called the 55-year-old Switzerland-based businessman Patrick Drahi, who bought Sotheby’s for $2.7 billion and has taken on an additional $1 billion dollar in debt, a “…well-regarded entrepreneur”. Drahi is the founder of Altice, a leading telecommunication brand that is now a media, advertisement, digital and tech giant, and he possesses an estimated net worth of $9.4 billion. According to a Financial Times piece, Drahi said that he was making this investment for his family, but only time will tell whether his decision to purchase Sotheby’s is strictly a financial move or whether it is, like some in the art world are surmising, a way to garner fame and access to the art and cultural assets of the world.
Drahi has previously made smart business investments of billions of dollars in US-based companies Suddenlink and Cablevision. As an art collector, he has been a keen buyer of Impressionist art, and Contemporary and Modern art, his possessions of these beingvalued at just under $5 million. According to an Artnet article, Artpricereported him to be the 252nd most prominent art collector in the world. In a statement, Drahi said he foresaw no changes having to be made to Sotheby’s existing management, strategy and teams around the world, saying that they would continue to operate with his full support.
The board of directors and shareholders at Sotheby’s have agreed to receive $57 in cash per share of common stock. This includes the employee shareholders too. The paid value is significantly higher than the stock that is being traded at the New York Stock Exchange. The stock had dropped around 40 percent in the past year, touching a low of $32 in comparison to its high of $56. Only news of the takeover made the stock price spring up to $55 at the NYSE. Sotheby’s will no longer trade on the NYSE. According to an Artnet article, the boutique investment bank Lion Tree Advisors was Sotheby’s official financial advisor for the $3.7 billion deal.
The Artnet article also mentioned that, while the value of the global art market has been rising in the last 20 years, auction houses are struggling under extreme overhead costs. As collectors ask for policies that are more favourable to them, margin values are decreasing and auction houses find themselves entering into guarantees with outside parties to minimise risks. Christie’s, being a private art trading organisation, has managed to keep its financial information concealed over many years, which some say have allowed them to take more risks. Sotheby’s, on the other hand, has been focused on hiking up its sales in the middle market by taking over other relevant art-related businesses.
Since one of the art market’s biggest players is now going private, the public will likely not be able to acquire information, profit reports, financial ledgers and other organisational documents of Sotheby’s. According to the Artnet article, this can result in a ‘crippling blow to transparency in the art market’. On the other hand, according to the article, several consequential facets of the auction house’s dealings as a public entity–like in-house financial guarantees, winning bidders, and payment statuses of acquisitions – are not stated in clear terms in Sotheby’s existing public filings as is.
The art world waits to find out what this step means for the art-auction market at large, and the idea of transparency.
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