Sotheby’s Grants Buyouts to 80 Employees at Cost of $40 Million

The move will result in a five percent reduction in global staff.

Tad Smith.
Photo: Courtesy of WK ART.
Photo: Sotheby's.

Photo: Sotheby’s.

Sotheby’s will grant buyouts to 80 employees and take a $40 million charge in the fourth quarter in an effort to cut costs, according to a filing made December 14 with the Securities and Exchange Commission. The move will result in a net reduction of approximately five percent of its global headcount of roughly 1,600 employees.

It is part of a series of “regional voluntary separation incentive programs aimed at reducing headcount and associated compensation costs,” according to the filing.

As artnet News reported last week, longtime finance expert Mitchell Zuckerman was among those who successfully applied for the buyout. The initiative was first disclosed in an 8-K SEC filing that Sotheby’s made on November 13. That news followed its third quarter earnings report on November 9 in which company executives and analysts parsed the hefty $500 million guarantee that Sotheby’s extended to the heirs of former chairman A. Alfred Taubman to secure the right to sell works from his estate.

According to the most recent filing, the buyout programs were offered to Sotheby’s employees in “jurisdictions where it was practical to do so” though these jurisdictions were not specified in the filing.

Sotheby’s “expects to recognize a charge of approximately $40 million in the fourth quarter of 2015 as a result of the Programs,” according to the filing. “This charge includes $4 million of accelerated equity compensation expense and $5 million related to 2015 incentive compensation that would have been paid to participants had they remained with Sotheby’s.”

Bid-Dec15

Source: Yahoo Finance

Shares of Sotheby’s closed up slightly at $26.58 per share in trading on the New York Stock Exchange after trending down for the month.

Some Wall Street analysts were less than pleased with the move. David Schick, managing director at Stifel, said in a report: “Just when you thought the optics” for the fourth quarter, “could not get worse,” the company released a filing indicating a $40 million charge, for headcount reductions.

Schick says Sotheby’s “modernizing is a good thing, in our view, but over the long-term. In the short-term it’s likely to cause more friction to the business before it helps. We have seen talent moving around the art world recently, that’s not news. But for now visibility will be very tough. Will [Sotheby’s] overshoot in expense reduction? It actually seems unlikely given deceleration we are seeing in art markets. [Sotheby’s] combination of the Taubman overhang for 4Q15-1Q16, softness in the art market, some noise of more dealer purchases of art, and some artist prices so high it could be argued it’s hurting the art market– we expect [Sotheby’s] shares are rather at the mercy of the macro trade for now. This isn’t necessarily bearish on its own – Monday shares were up 2.6% in a flattish equity market.”

 


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