Artprice, currently the largest listed art data company in terms of market capitalization, recently published its nine months 2009 financial statements. Unlike artnet, which published its accounts several weeks ago, Artprice is suffering in the core business of art price data.
Given that Artprice only reports sales figures – for some reason using a structure where 95% of all revenue is captured by just one segment called “Internet” – we can only compare and analyze the firm’s topline performance. In the first nine months of 2009, Artprice’s sales totaled EUR 3,156,000 (versus EUR 9,242,000 for artnet for the same period). This marks a 21% decline over the same period of 2008 (artnet achieved a 4.3% increase in sales for the same period of time).
Even as Artprice might have a leaner cost structure with less staff, no massive publishing program, no foray into online auctions and operations based only in Lyon (artnet runs two offices in Berlin and New York), Skate’s assumes that the quality of Artprice’s products and services has been significantly damaged due to an inability to invest in better data management technologies. Artprice was hit seriously by a DDoS attack this last summer and now apparently economizes even on such areas as investor relations (e.g., by not offering management discussion and analysis to its financial results and limiting its disclosure to French). Skate’s therefore believes that Artprice currently operates at the brink of profitability and is becoming increasingly vulnerable to both international competition (artnet and, to a lesser extent, MutualArt and Artfacts are the major threats) and regional high-growth art market data providers (e.g., Artinvestment.ru in Russia and Artron.net in China).
The firm is strongly dominated by the charisma of Thierry Ehrmann, who dedicated most of his comments in the financial statements to a focus on various legislative initiatives in France and the EU, which are meant to even further liberalize and support the online art trade. He offered nothing in the way of comment on Artprice’s profitability, debt and cash positions.
Reflecting on Artprice’s declining revenues, its strong financial underperformance when compared to its major peer (artnet) and its lackluster disclosure, the recent surge in the company’s share price is hardly justified by Artprice’s apparent financial condition. It is obvious that Artprice is turning into a high-risk company for its minority shareholders, and given the company’s substandard financial reporting (published exclusively in French), we can only assume that Artprice shows little interest in attracting investors outside France – which is curious given the company’s multilingual website and apparent interest in maintaining a global client base.
In light of Artprice’s recent statements and our above analysis, Skate’s has therefore decided to reduce the target price for Artprice to EUR 5 per share.
Exhibit 1 – Artprice’s 9M 2009 Financial Disclosure
Exhibit 2 – Artprice Year-to-date Share Performance vs artnet and Skate’s Art Stocks Index
Source: Skate’s Art Market Research.