Sotheby’s is bracing for a potentially nasty boardroom brawl.
The venerable New York auction house said Wednesday that its board had launched a “thorough review of its capital allocation and financial policies” as it feels the heat from a trio of activist investors, including Third Point’s Dan Loeb.
While the activists have not publicly disclosed their specific demands, a sale of the auction house is one of the options they are pursuing, sources said.
An insider at one of the hedge funds said it wants to force a sale by the end of the year.
Sotheby’s said it will present the results of its board review to investors early next year, but the insider said the move “does not significantly change the dynamic” with his hedge fund.
Last month, Loeb’s Third Point disclosed a 5.74 percent stake in Sotheby’s and said it may “engage in a dialogue with members of the board or management… that may relate to potential changes of strategy and leadership.”
His announcement followed a similar warning shot fired weeks earlier by Richard “Mick” McGuire’s Marcato Capital Management, which took a 4.92 percent stake. Marcato said it could seek to discuss “enhancing shareholder value through various strategic alternatives.”
And last month, Nelson Peltz and his Trian firm disclosed a 3 percent in Sotheby’s, although it didn’t make its intentions known in a regulatory filing.
Trian, Third Point and Sotheby’s declined to comment. Marcato didn’t return a request for comment.
The Sotheby’s letter — filled with reminders of its recent successes — came across as a preemptive move.
“This announcement is Sotheby’s way of getting out ahead of the activists’ agenda,” said Andy Freedman, of Olshan Frome Wolosky, a law firm that specializes in boardroom battles.
The stock, which is up a whopping 44 percent this year, closed up 2 percent to $48.34 share.
In addition to a sale, investors could also push to take the company private or force it to monetize its massive real estate holdings.
Over the summer, the auction house hired real estate investment banking company Eastdil Secured to help it find buyers for the massive Upper East Side space.