Loeb’s ‘holy jihad’ defeated Sotheby’s

Dan Loeb’s rancorous victory over venerable auction house Sotheby’s was complete in November, when Chairman and CEO William Ruprecht agreed to step down under pressure from the pugnacious activist, and the stock finally began to trade up.

In many ways, 53-year-old Loeb had plied his familiar trade, starting with vitriolic letters that called Sotheby’s “an old master painting in desperate need of restoration.”

Loeb threatened to wage “holy jihad.”

Ruprecht called him a “scumbag.”

Sotheby’s made a few concessions, like giving shareholders a one-time $300 million dividend and promising to sell off some real estate.

Then suddenly, in May, just one day before its annual meeting, where Loeb was planning to launch a proxy contest for three Sotheby’s board seats, the company completely caved.

But Loeb took the activist battle a step further: He demanded the browbeaten Sotheby’s pay $10 million of his legal bills.

Loeb’s Third Point hedge fund had incurred those bills when it tried to overturn Sotheby’s two-tiered poison pill, which limited activists to a 10 percent stake. Loeb lost in court, but Sotheby’s agreed to drop the poison pill anyway.

Sotheby’s ended up spending $20 million, or almost half its net income for the first nine months of the year, in the legal battle. Half of that went to cover Loeb’s costs.

Despite Loeb’s efforts to turn it around, the stock has stumbled, down 18 percent last year. But Sotheby’s began to rise with Ruprecht’s resignation. Closing the year at $43.18 per share, Loeb is finally back in the black, with a more than $25 million gain.