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

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 For more information on Weng Fine Art AG, please visit

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.

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.

Sotheby’s shares up 7.5% this week on Marcato annoucement

July 31, 2013

Since trading opened on Monday, July 29, shares in Sotheby’s have jumped 7.5% to close at $45.00 today, July 31, 2013.

In a filing issued Monday, Marcato Capital Management, a hedge fund, disclosed a 6.61% stake in Sotheby’s, calling the auction house’s shares “undervalued” and an “attractive investment.”

Various news reports have mentioned Marcato’s particular interest in Sotheby’s real estate holdings. Marcato began making purchases on May 31, after Sotheby’s real estate disclosures.

Marcato Capital Management is considered to be an activist investment firm that seeks out value stocks.

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, 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 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 >>

Skate’s Art Stocks Review – March 2013

March 8, 2013
In this Issue:

  • Sotheby’s Announces 2012 Performance Results, Falls Behind Christie’s
  • Artprice 2012 Annual Performance: Stagnating Revenues amid Chinese Expansion
  • MCH Group Sees Skyrocketing Share Price
Click here to download the March issue >>

Collectors Universe: Numismatic Market Downturn Hits Overall Performance, Resulting in Nearly 50% Income Reduction

February 11, 2013

On February 7, 2013, Collectors Universe filed second quarter and half year performance results that reflect a troubled position for the company. Although the three months ended December 2012 are usually the weakest period of the fiscal year, this time the decline was even more significant due to an overall downturn plaguing the company’s core market.

With its involvement in the narrow sector of collectible coins and stamps, the only way Collectors Universe will be able to achieve success is to hold a leadership position in this market. Securing this position involves maintaining the highest level of expertise, continuous development of services, as well as growth of market share domestically and through conquering new markets. The company’s management has been active on all of these fronts; to date, Collectors Universe has pursued two main business development priorities—its online presence and its overseas operations.

The online services of Collectors Universe include a large, subscription-based database dedicated to certified coins, sports memorabilia and autographs. The company also offers online collection management that allows for monitoring of the latest market trends, current prices and supply. As for the growth in market share, Collectors Universe is investing heavily in its Hong Kong and Paris operations, which is translating into an increased volume of coins submitted.

Nevertheless, the current situation in which Collectors Universe finds itself is less than perfect. Exhibit 1 in the full Market Note shows that the company’s published performance results are universally negative in comparison to the previous year. Net revenues dropped by 16% to USD 9.6 million during the three months from USD 11.5 million in the same quarter of the prior year. Exhibit 2 reveals that this performance decline was caused by a 26% reduction in coin service revenues. Operating expenses decreased by 4%, while operating income dropped by 50% due to the decline in service revenues. Net income also fell, declining by 48% in the second quarter to USD 0.5 million.

Yet, despite the company’s difficulties, there was a silver lining in the second quarter performance; revenues generated by trading cards and autographs gained 10%, partially offsetting the overall dip. We should also note that not all external factors acted against the company. During a recent auction, a very rare first strike silver dollar from 1794 brought USD 10 million. In 2003, this coin was graded by Collectors Universe, which serves as evidence of the company’s expertise and reputation.

If Collectors Universe is to successfully overcome its present difficulties, the company’s newly appointed CEO, Robert Deuster, must further strengthen management and find a way to confront the challenges brought on by external factors.

To read the full Market Note with data, please click here.


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