Richard McGuire of Marcato Capital Management has disclosed, in a filing with the SEC, its presentation on Sotheby’s (NYSE:BID), from the “Active-Passive Investor Summit.” In the presentation, Marcato presented its case on the company and analyzes the measures that could increase its value. Marcato holds around 4.56 million shares of Sotheby’s, equal to 6.6% of the outstanding stock. Moreover, the fund stated that it supports the nominees for the board of directors appointed by Dan Loeb‘s Third Point last month.
Marcato claims that the company has a significant level of unproductive capital, which could be reallocated or returned to shareholders without affecting business operations. Improving these capital allocation policies could benefit the cost-return relationship of Sotheby’s (NYSE:BID) and the long-term shareholder value. According to the fund, even after the company pays a special dividend worth an aggregate $300 million, it still could unlock over $1.0 billion of additional capital in the next 12 months.
Currently, Sotheby’s (NYSE:BID) performance has been lower in comparison with its competitors. The company has done some steps to change the situation, but some moves still need to be done, such as the return of excess capital, assuming some revenue growth opportunities, and the optimization of the expense structure of the company, the shareholder said.
“Board members that bring material ownership would ensure a sustained sense of urgency and a sharper focus on shareholder value creation,” Marcato also said in its presentation.
The full presentation attached to the SEC filing can be found here.
The stock of Sotheby’s (NYSE:BID) has declined by around 23% since the beginning of the year. On Monday, Third Point issued a letter sent to Sotheby’s shareholders urging them to vote for its nominees at the next meeting.
“On a head-to-head basis, we are confident our nominees have more relevant experience, more impressive track records of long-term value creation, and will bring more valuable insight to better represent Sotheby’s shareholders. We believe you will agree and ask that you support the Shareholder Slate by voting your white proxy card today,” the letter said.
In October 2013, Marcato issued another presentation from the ”Excellence in Investing: San Francisco” conference. The fund stated that Sotheby’s held real estate and financing operations that could represent strong points overlooked by investors. Moreover, Marcato suggested that the auction house held $1.3 billion in trapped equity value, which should have been invested in share repurchases bringing more value in the long-term run.