After Sotheby's is sold for $3.7bn, investors should bid on these other art market disruptors
Venerable auction house Sotheby's has been snapped up for $3.7bn, says Chris Carter. But there's plenty of action for investors at the other end of the art market too.
French-Israeli telecoms billionaire Patrick Drahi is to pay $3.7bn for Sotheby's (NYSE: BID) , the New York-listed auction house through his holding company, BidFair. Investors will get $57 a share, representing a 61% premium on the most recent closing price. That's a lot of money for an old business, founded in London in 1744 especially one dealing in antiques. Multi-billion-dollar price tags are these days usually reserved for hot young tech stocks. But then again, the venerable auction house has been on something of a tear of late.
Since the most recent low in February 2016, the shares had risen by 85% as the high-end art market as itself mushroomed. Last month, Sotheby's brought the hammer down on $842m in sales at its Impressionist and Modern, and Contemporary Art auctions, including $111m for an impressionist painting by Claude Monet. Still, the news yesterday sent Sotheby's shares rocketing by another 59%. Not bad for a 275-year-old company.
True, Sotheby's banked $109m in profits on revenues of a little over a billion dollars in 2018. Here's the big "but" the share price has also been prone to some very wild swings over the last few years. So, we say it again $3.7bn is a lot of money for Drahi to pay. "I think he's bonkers to pay that price," a London art dealer told the Financial Times. "Sotheby's shareholders will be jumping up and down for joy." Activist investor Daniel Loeb is one. He is Sotheby's second-biggest shareholder and the deal represents a $125m profit for his Third Point hedge fund.
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But for Drahi, it is also about more than just the money. While he is regarded as a relative unknown in the art world, he is a collector, owning works by Pablo Picasso, Henri Matisse and Eugne Delacroix. Adding Sotheby's to his collection gives Drahi "a seat at the table of the rich and famous", as another billionaire art collector was quoted as saying in the FT.
If retail investors can no longer buy Sotheby's, what else is there?
Artnet (Frankfurt: ART) was founded in 1989. Today it exists mainly as an online price database, a selling platform for galleries and as an online auction house. It reported operating profits of $905,000 last year, up from $407,000 in 2017.
Then there's Paddle8. The New York-based online auction was co-founded in 2011 by old-Etonian Alexander Gilkes. It got into a spot of bother after its merger partner, Auctionata, declared insolvency in 2017, but Paddle8 emerged intact. At the start of 2018, Switzerland's The Native (Zrich: SWX) paid CHF 8.5m (£6.8m) for a 15% stake, and Gilkes now sits on the board of the Swiss tech and e-commerce company as co-CEO.
Finally, Artsy is an online art database and marketplace for galleries that was launched in 2012. In July 2017, it raised another $50m in a funding round that saw Larry Gagosian (founder of the famous Gagosian Gallery) pitch in. Rich Barton, the founder of online travel website Expedia, sits on the board. It's true that Artsy is currently private, but who knows? It could get snapped up too.
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Chris Carter spent three glorious years reading English literature on the beautiful Welsh coast at Aberystwyth University. Graduating in 2005, he left for the University of York to specialise in Renaissance literature for his MA, before returning to his native Twickenham, in southwest London. He joined a Richmond-based recruitment company, where he worked with several clients, including the Queen’s bank, Coutts, as well as the super luxury, Dorchester-owned Coworth Park country house hotel, near Ascot in Berkshire.
Then, in 2011, Chris joined MoneyWeek. Initially working as part of the website production team, Chris soon rose to the lofty heights of wealth editor, overseeing MoneyWeek’s Spending It lifestyle section. Chris travels the globe in pursuit of his work, soaking up the local culture and sampling the very finest in cuisine, hotels and resorts for the magazine’s discerning readership. He also enjoys writing his fortnightly page on collectables, delving into the fascinating world of auctions and art, classic cars, coins, watches, wine and whisky investing.
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