Noble Investments Leaves Skate’s Art Stocks Index

December 2, 2013

On September 26, 2013, the boards of Stanley Gibbons and Noble Investments announced that they had reached an agreement on Stanley Gibbons’ acquisition of a 100% stake in Noble, and on November 21, Stanley Gibbons announced that the acquisition had been completed under the terms initially proposed. As a result, Skate’s is announcing that Nobel Investments, in ceasing to exist as a publicly traded company, has been removed from Skate’s Art Stocks Index effective November 22.

This consolidation deal in the collectibles segment gives the new Stanley Gibbons several key advantages, including greater scale, product diversification, and better access to capital. Skate’s believes that it makes considerable strategic and business sense and therefore applauds this transaction.

As a result of the consolidation, oligopolistic market dynamics in the coins and collectibles segment between Collectors Universe and the new Stanley Gibbons will resemble the similar dynamics long observed in the auction world between Christie’s and Sotheby’s, as well as in the price database market between artnet and Artprice.

Skate’s Art Stocks Index has been updated to reflect Stanley Gibbons’ acquisition of Noble Investments. To read more about and view the current index, please visit http://skatepress.com/?cat=2.


artnet Management Admits to Giving Shareholders Incorrect Financial Statements at Time of Hostile Takeover Bid, Weng Fine Art AG Exceeds 5% Ownership Threshold in artnet

November 25, 2013

artnet AG has released its nine months financial results, which present an overall bleak picture caused by declining revenues, among other factors. The EUR 0.5 million shareholder loan that the company’s founder and majority owner, Hans Neuendorf, had to provide in March to keep it out of insolvency was a further sign of trouble. The most important new information, however, is the disclosure that artnet’s management supplied its shareholders with “incorrect” financial statements dated June 30, 2012.

The inaccurate accounts pose a potential threat of major litigation for artnet. The company’s shareholders received a hostile tender offer from Redline Capital Management SA in September 2012 when the Luxembourg-based and Russian-owned investment firm offered EUR 6.4 per artnet share, which at the time represented a 40% premium to the market price. A majority of shareholders voted to reject the offer, however, and artnet’s stock is currently trading well below EUR 3 per share.

In other words, artnet shareholders relied on “incorrect” financial information when making their decision about the tender offer received from Redline last September.

Page 14 of artnet’s September 30, 2013 financial disclosure reads:

The German Financial Reporting Enforcement Panel (DPR) established that the condensed interim consolidated financial statements were incorrect for artnet AG, Berlin for the period ended June 30, 2012.

As of June 30, 2013, the condensed interim consolidated financial statements have posted a revenue of 229,000 EUR from the continued operations, and a loss of 1,374,000 EUR from discontinued operations. The expense of 232,000 EUR was falsely allocated to the discontinued operations. This expense would have carried on despite the closure of the magazine.

Additionally, as per the definition, the closure of the Paris office does not fulfill the requirements of a Discontinued Operation. If the expenses from the Paris office had been distributed among the business divisions, as they were in fiscal 2011, earnings would have been reduced by an additional 512,000 EUR. The incorrect disclosure of earnings from discontinued operations violates IFRS 5.33 (a).

The previous year’s information from the condensed interim consolidated financial statement and cash flow for artnet AG for the first nine months of 2012 was corrected in the condensed interim consolidated financial statement for the first nine months of 2013 to reflect the DPR’s findings. The revised figures in the charts have been indicated as corrected. All information in this interim statement reflects the modified amounts.

Redline has declined to comment on this report.

In a separate development this week, German-listed Weng Fine Art AG, Redline’s acting-in-concert partner for the 2012 takeover bid, announced that it went over the 5% ownership threshold in artnet AG by acquiring shares from the California-based Artis investment fund. It reported a 5.33% ownership interest in artnet AG as a result of this transaction.

For more information about artnet and its nine months financial disclosure, please visit www.skatepress.com/?cat=56. For more information on Weng Fine Art AG, please visit www.skatepress.com/?cat=149.


New Test for Investment Potential as Artist Pension Trust Prepares to Benefit from First Art Sales after a Decade of Existence

November 13, 2013

In an age when the concept of art investment has managed to obtain the same respect as other activities in the art market, questions of viability and practical implementation nevertheless remain. Practiced by numerous institutions and individuals for over 40 years, with a fluctuating degree of success as evidenced by the British Rail Pension Fund’s investments, no one has yet managed to make a successful art investment case on a long-term basis.

Yet this lack of success hardly serves as a hurdle for those who produce indices and other tools to track the art market and make it more transparent. Furthermore, key players continue to discover and experiment with alternative investment methods, attracting financial experts and art world representatives in the hopes of achieving a successful outcome. Artist Pension Trust (APT) has managed to go even further by attracting artists themselves. As APT prepares to celebrate its tenth anniversary next year, Skate’s has decided to analyze its achievements, limitations and the institution’s overall potential.

Since 2004, APT has managed both to grow and expand internationally, developing eight regional trusts in New York, Los Angeles, London, Berlin, Mexico City, Mumbai, Beijing and Dubai…

Please click here to download the full article with data.


Upturn in U.S. Market Boosts Mallett’s Profits

September 12, 2013

Mallett, a publicly traded antiques and fine art dealer, recently published its results for the six months ended June 30. The London and New York based company posted a pretax profit of GBP 0.2 million, a figure that represents a GBP 0.1 million increase compared to the same period last year, although it is still below the GBP 0.3 million achieved in 2011.

Although Mallett’s total sales dropped slightly to GBP 6.6 million, from GBP 6.7 million in the first half of 2012, gross profit remained constant at approximately GBP 1 million.

The art dealer credits its positive financial results mainly to the improvement in the U.S. market. The turnover for Mallett’s U.S. operations almost doubled from the same period last year, from GBP 1.7 million in 2012 to GBP 3.4 million in 2013.

The upturn in the U.S. market has caused the company to revise its planned subletting of part of its New York showroom, a measure considered in line with its 2013 strategy to contain costs.

“The market in the U.S. has been dwindling for some years, and we thought we would be able to save a significant amount of money whilst keeping a presence in New York by letting out part of the showroom,” Mallet’s Finance Director, Michael Smyth-Osbourne, told Skate’s. “Then the economy picked up and the business started coming in, as a result of which we are revisiting the U.S. strategy,” he added.

In terms of further property management changes, the company announced that it has signed an agreement to sell its freehold Clapham property for GBP 2.65 million. The expected completion date of February 21, 2014 is to give enough time for Mallett’s restoration subsidiary Hatfields to relocate. Mallett’s board is looking into how best to manage the proceeds from the sale, including a possible return of cash to shareholders.

Despite the fact that the market in the UK has proved difficult during the reporting period, and although the company remains cautious as to its outlook, there are signs of improvement, Mr. Osbourne said. Masterpiece London Limited, of which Mallett owns over 23%, staged its fourth fair at the end of June, which saw a 20% increase in attendees to almost 34,000 over the eight days of the event. Mallet’s share of the profit is expected to be approximately GBP 85,000, compared with GBP 83,000 last year.

The art retailer reported modest sales in Brazil and China, in line with the company’s 2013 strategy to promote Mallett in these and other emerging markets.

Finally, the company announced its continued focus on turning the Mallett website into a competitive e-commerce platform. “Websites are becoming a key sales tool for any business, and we would like to use our website for both marketing and sales and additionally, turn it into an educative tool, with proper photos, history and background of the antiques,” Mr. Osbourne said.

During the reporting period, the company completed the sale of the business and certain assets of James Harvey British Art Limited.

To download and read the full text with data, please click here.


Amazon Diversifies into the Art Market: New Player Has Potential to Dominate the Online Art Trade

August 13, 2013

Amazon, a global online retailer that has become the leading consumer destination on the internet (most popular online retailer and eighth most popular website in terms of frequency of visitors*) will celebrate its 20th anniversary next year. Over the past two decades, it has offered nearly every product imaginable, but apart from a small section for art-related materials called “Arts, Crafts and Sewing” it has largely stayed away from the art market.

Skate’s has long anticipated that Amazon would move into the art trade due to the potential of its quality platform.[1]  Indeed, among all current players in the online trade Amazon clearly stands out due to its global reach and broad international audience, the accessibility of its user-friendly interface, and its long experience in marketing various types of products. All of these qualities give Amazon an opportunity to conquer the art market.

In August 2013, Amazon did finally make the decision to diversify into the art trade by partnering with more than 150 galleries and dealers. The company’s initial presentation to the art world contains around 40,000 artworks by approximately 4,500 artists.

This move, which has generated both positive and negative feedback from art market professionals, will test the art market in a new way. For the past several years, various market players have attempted to present a viable platform to serve buyers interested in collecting online. Yet, there is little proof that the existing ventures have managed to succeed. The vast majority of companies involved are keeping revenue and profitability secret, but those publicly traded companies that are obliged to announce their performance results, such as artnet and Artprice, serve as a source of encouragement to others looking for new ways to explore the online trading model.

Amazon has yet to justify its decision from a financial perspective, and it will be some time before we see the results of an established company diving into what remains a very challenging market with still uncharted waters. In the meantime, Skate’s has added Amazon to its e-commerce ratings, which measure the technical and artistic merit of online art traders. Regardless of how Amazon ultimately performs in this sector, it is safe to say that competition is about to intensify.

Exhibit 1 below presents the top 10 businesses listed by their distribution power as measured by the number and frequency of users visiting their websites. Exhibit 2 presents a customized approach developed by Skate’s to alternatively grade art industry firms for their artistic merit in terms of providing online trading service and functionality. This rating is based on four principal qualities: vetting for art offered (no counterfeits, accurate authentication, and limited counterparty risk), ease of use, transaction and shipment capabilities and, finally, transaction costs.

Please click here to download the full report with data.



Collectors Universe Declares Quarterly Cash Dividend of $0.325 Per Common Share

August 6, 2013

Collectors Universe, a leading provider of value-added authentication and grading services to dealers and collectors of high-value collectibles, as well as a constituent of Skate’s Art Stocks Index, announced on July 31 that it would pay a quarterly cash dividend of $0.325 per share of common stock for the first quarter of fiscal year 2014. The cash dividend will be paid on August 30, 2013 to stockholders of record on August 16, 2013.

Collectors Universe has kept its quarterly dividend of  $0.325 per share steady since November 2010. Shares in the company are up 3.08% since August 1.


Skate’s Art Stocks Review – May 2013

May 25, 2013
In this Issue:

  • Sotheby’s Q1 2013 Performance: Fierce Competition and Focus on New Markets Leaves Auction House at a USD 22 Million Loss
  • Collectors Universe Record Revenues Pave the Way for Asian Activity

Click here to download the May issue >>


Neuendorf Goes All-In as artnet Melts Away, and Global Pure-Play Art E-Commerce Rivals Raise Over USD 50 Million in Fresh Capital YTD

April 30, 2013

artnet delayed publication of its 2012 financial results by over four weeks and finally released the results on Monday, April 29. Hardly a surprise, artnet’s annual report now evidences what Skate’s and other industry analysts suspected long ago—that artnet is heading toward a liquidity crunch and is hugely underperforming in its auction segment (proclaimed by artnet as its area of focus) when compared to its pure-play rivals like auctionata in Berlin, artspace, art.sy and paddle8 in New York and Saatchi Online in the UK.

All the artnet performance metrics in 2012 worsened on a y-t-y basis. Revenues are down by 6% in USD terms (flat in EUR terms due to the favorable USD/EUR exchange rate), and the firm went from an operating profit of EUR 0.9 million in 2011 to an operating loss of EUR 0.7 million in 2012. Furthermore, artnet’s operating cash flow went from positive to negative, its headcount increased and its cash position has been depleted to the level of 4-5 months at the burn rate artnet currently generates.

In Q3 2012, Hans Neuendorf successfully campaigned against Redline’s hostile takeover attempt when the Luxembourg regulated and based, Russian-funded investment manager offered EUR 6.4 per share of artnet stock (Skate’s advised on this transaction). The stock is currently trading at the EUR 2.8 per share level, living evidence of a bad decision made by Mr. Neuendorf and those shareholders that supported him last year.

artnet’s shareholders can find little comfort in the company’s 2012 disclosure – the auction segment that was supposed to drive the firm’s topline has stalled and produced just EUR 2.3 million in sales and EUR 0.18 million in gross profit for the year. This is less than 15% in revenue growth compared to 2011 and more than a 50% decline in gross profit compared to 2011.

This profitability decline is no wonder, as by now artnet has lost its first-mover advantage in the online art trading space completely. Much better capitalized, legacy and Neuendorf-leadership free, pure-play online art trading companies are grabbing market share and addressing the economics of the online art trade much faster. According to Skate’s estimates, the median growth of the six strong private peer group (Liveauctioneers, Saatchi Online, paddle8, artspace, auctionata and art.sy) was just below 40% in online art trading revenue for 2012, and these six companies raised over $50 million in fresh capital in the first four months of 2013. The online art trading market that artnet had for itself just three years ago is now an ultra-competitive space where artnet is no longer in the top three in terms of volume, has no capital with which to compete and possesses no remaining competitive advantages apart from its brand and price database. Those strengths are still important, but, based on the firm’s 2012 results, clearly not enough to ensure a viable business model under current artnet leadership.

Likely to avoid a going concern qualification, Mr. Neuendorf had to provide the auditors and shareholders with comfort that he would personally finance artnet through shareholder loans and deferrals of his compensation when the firm runs out of cash (and there is no if here – artnet will run out of cash this year).

In the global arms race for dominance in the online art trade, artnet has completely transformed itself from incumbent leader to an obvious victim. This only brings to mind a vivid image from a Jurassic Park movie: a white goat expecting T-Rex in the rain in the middle of a dinosaur theme park yet to be opened.

At below EUR 3 per share, and with no debt, no poison pills—thanks to the minority shareholders campaigning and litigation from last year—and some remaining prize assets, such as its price database and brand, artnet seems to be screaming for a new takeover suitor. Skate’s can bet we will hear about one shortly.

Click here to download the full Market Note with data >>


Skate’s Art Stocks Review – April 2013

April 11, 2013
In this Issue:

  • Mallett’s Self-Salvation Strategy after Low 2012 Performance
  • Weng Fine Art Announces 135% Profit Growth in 2012 and Plans to Integrate Further Activities into Current Business
  • Collectors Universe Launches Operations in China, Opening Shanghai Office Amid Declining Performance
Click here to download the April issue >>

Introducing Skate’s Focus – Poland’s Art Market

March 22, 2013

Skate's Focus-Poland's Art Market

In 2013, in addition to regular publications dedicated to the state of the global art market, Skate’s is pleased to present a new angle of our research—Skate’s Focus. Upon choosing a particular country, Skate’s works with local art market specialists to identify and present the most current and accurate picture from the inside. The resulting report projects a two-sided view on the chosen country—the global market presence of native artists and the performance of the country’s domestic art market. As a pilot project, Skate’s has chosen Poland, a young but innovative and quickly growing art market in central Europe. Joining Skate’s for the current report is Art&Business Magazine, the leading Polish magazine dedicated to art.

Please click here to download the full report >>


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