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The Morning Brief: Sotheby’s Fails to Please an Activist Investor
It is not easy to please activist hedge fund managers. Auction house Sotheby’s, under assault by both Daniel Loeb’s Third Point and Richard T. McGuire III’s Marcato Capital Management, announced Wednesday that it would pay a $300 million special dividend and buy back $150 million in stock, including $25 million this year. “The message we are delivering is clear -- we are returning meaningful capital to our shareholders now and in the future and establishing a framework that puts Sotheby’s in the strongest position to compete and win in this marketplace while delivering value to our clients,” said chairman, president and CEO Bill Ruprecht in a press release. However, it was not clear enough to Marcato, which complained that the package was too skimpy. The San Francisco hedge fund firm fired off a press release calling on the auction house to return a total of $1 billion of capital to shareholders within 12 months. “Today’s announcement is a modest step in the right direction, but Sotheby’s can comfortably return more capital to shareholders and do it more quickly than under its proposed plan,” McGuire said in a press release. “We encourage our fellow shareholders to continue to press this Board and management team to act urgently and return significant additional capital in 2014.” Shares of Sotheby’s fell slightly, but much less than the overall market.There was no apparent comment from Loeb on the Sotheby’s situation. But the activist investor did get a present from another of his targets, Dow Chemical, which announced it would hike the dividend by 15 percent and boost its stock buyback authorization to $4.5 billion. Shares of Dow Chemical surged nearly 4 percent on an otherwise bad day for stocks in general. There was no apparent comment from Loeb. But he got his own present from Dow Chemical, which announced it would hike the dividend by 15 percent and boost its stock buyback authorization to $4.5 billion. Shares of Dow Chemical surged nearly 4 percent on an otherwise bad day for stocks in general.
Pershing Square Capital Management has told clients that Shane Dinneen, the analyst credited with doing the detailed work on its high profile, if disastrous, negative bet on Herbalife, is leaving the New York City hedge fund firm, according to Bloomberg. “For several months, Shane Dinneen, a member of our investment team since late 2007, has expressed interest in leaving Pershing Square to pursue other interests,” the firm’s founder William Ackman reportedly wrote in the letter. “As Shane is one of the most talented investment analysts I have ever worked with and someone I hold in high regard, I have done my best to convince him to stay with the firm. Recently, he decided it was time for him to move on to areas of his own interest outside of activist investing.” Dinneen is also credited with participating in several successful Pershing investments, including General Growth Properties and Burger King Worldwide.
The average hedge fund rose 11.08 percent in 2013, according to London-based alternatives data collector Preqin. This was better than the 10.13 average gain in 2012. Preqin reports most investors were satisfied with last year’s performance. It said 84 percent of investors interviewed for its 2014 Global Hedge Fund Report stated that last year’s returns met or exceeded expectations.
Shares of Facebook jumped around 4 percent or so in after- hours trading after reporting earnings that were better than Wall Street expected.
UBS cut its price target on Apple to $625 from $650 but maintained its Buy recommendation, saying new products are “likely to be a second-half catalyst.” It does concede, however, that potential iPhone maturity is a “legitimate concern,” but growth should improve as China Mobile ramps up and new products are introduced. UBS says it lowered the price to bring certain ratios into line with other large-cap tech stocks. The stock closed Wednesday at $500.57, down 1.17 percent.