On Monday afternoon, the Artnet magazine Twitter feed was unusually somber. For years, the feed has been a reliable, go-to source for breaking news stories with actual relevance (not always a given in art journalism), but on that day the final post featured an Instagram photo of Lower Manhattan. “Goodbye beautiful Woolworth Building views,” read the message, written by the Artnet editor Walter Robinson, who had just been told that the magazine, where he’d served for 16 years as its only editor, was kaput. Even in this rare personal Tweet, it was hard not to see the news angle. Just a few months ago, Artnet moved to a lavish space on the 26th floor and then, this week, cut the magazine for failing to turn a profit.
“I’m shaken,” New York magazine’s art critic Jerry Saltz, whose writing has appeared on Artnet since 1998, told The Observer yesterday. He added that he was considering sending back his “low-three figure” freelance check for this month. “A really dynamic, really open, unpredictable, chaotic species just became extinct.”
“Hans, by allowing Artnet Magazine to go under you have destroyed a lifetime’s good work in the art world and tarnished your name forever,” former Artnet critic Charlie Finch wrote in an e-mail to the company’s longtime CEO Hans Neuendorf—restrained criticism, coming from author of the book Most Art Sucks. “No amount of money is worth that. In the end, you have confirmed Oscar Wilde’s famous adage that you know ‘the price of everything and the value of nothing.’”
News of the magazine’s closure nearly eclipsed the larger story from within the company that day, that Mr. Neuendorf—who had helmed Artnet since 1995 and built its signature product, an auction-price database that revolutionized the art market by essentially providing a “Blue Book” value for works of art—would step down at the beginning of next month.
The changes at the company are part of a larger power struggle between the current management and a group of shareholders that has recently been accumulating stock at a rapid clip. Until the announcement that Mr. Neuendorf would step down, and cede the title of CEO to his eldest son Jacob Pabst, 39, the family faced a proxy battle at its July 11 shareholder meeting, and still may lose the company. The threat to the Neuendorfs (Mr. Pabst takes his mother’s name) comes from a group of investors led by Russian art-market analyst and former investment banker Sergey Skaterschikov, founder of the art-market analysis firm Skate’s. In the matter of Artnet, Mr. Skaterschikov represents Redline Capital Management, where he sits on the board. Redline is owned by the Russian billionaire Vladimir Evtushenkov and has recently purchased enough stock to own at least eight percent of the company. Its capital already outclasses that of Mr. Neuendorf, who is 74 and was described in a recent article in Der Spiegel as having to sell some of his art collection to cover his debts. As if that weren’t enough, Redline is joined in its efforts to control the company by Rüdiger Weng, whose company Weng Fine Art takes a commodities approach to artworks, and who owns four percent of Artnet, thanks to purchases made this year.
In the coming weeks Mr. Weng and Redline expect to formally join their shares, and register the move with the Federal Financial Supervisory Authority, the German equivalent of the SEC, posing a serious threat to Mr. Neuendorf’s 26 percent majority. On top of all this, at the beginning of this year, Mr. Neuendorf lost two of the three people on Artnet’s supervisory board, and though they left with confidentiality agreements, Mr. Neuendorf said their reasons for leaving were completely unrelated to the power struggle currently facing the company.
The dissenting shareholders’ chief complaint is that, like the magazine, Artnet is not profitable, and requires new management. Reached for comment Tuesday morning, Mr. Pabst, the incoming CEO and current president, said the decision to close the magazine, along with the company’s 10-person Paris office, was unrelated to the current shareholder battle.
“We’ve been discussing this for many, many months, if not years, and the decision was finally made some time ago,” Mr. Pabst said. “It really has nothing to do with it. Skaterschikov and Weng keep saying that we need money. We really don’t need money. With these cuts we will be profitable this year, and next year, by over two million dollars and we really don’t need any money. That’s a false statement.”
“Nobody wants to let go of something that he’s doing, so it took a little bit of effort on my part to come to terms with it,” Mr. Neuendorf told The Observer, saying his decision to step down also had nothing to do with the recent actions of Mr. Skaterschikov or Mr. Weng. “Of course, I will remain involved. I’m a major shareholder. I founded the company and I will be there as an adviser.”
For Mr. Neuendorf, the trouble began late last year, when Mr. Skaterschikov approached him about the possibility of acquiring shares in Artnet. When Mr. Neuendorf said that he would not issue new stock, Mr. Skaterschikov offered to buy Mr. Neuendorf’s shares, with plans to make a tender offer for the rest of the company. Mr. Neuendorf said he had no intention of selling his majority, but continued to meet with Mr. Skaterschikov, and even told him about some 90,000 shares that had recently hit the market, of which Mr. Skaterschikov and his investors bought some 80,000, around one percent of the company, as a sign of good faith. He also, Mr. Neuendorf recalled, offered his services as an analyst to the company and Mr. Neuendorf declined, his objection being that Mr. Skaterschikov’s background lay more in finance than art.
At this point, things became less amicable. In late May, Mr. Skaterschikov sent out a notice to Skate’s subscribers saying that he would no longer continue to analyze Arnet’s stock because “we have been retained by one of our clients to provide strategic advice to the client’s investment strategy that involves the client’s acquisition of artnet AG shares.” Skate’s previous reports had not been positive anyway, headlined “Artnet’s Results for 2011 Show Disappointing Performance” and “When will Artnet correct its downturn?”
Mr. Neuendorf, last week, said that he viewed those reports as an effort to depress Artnet’s stock value so that Mr. Skaterschikov could buy shares at a lower price. And while it’s true that the company doesn’t currently turn a profit, Mr. Neuendorf said the company’s expansions in recent years, into the businesses of auction analysis and online auctions, account for the gap. If he were able to put the auction business on the balance sheet, Mr. Neuendorf estimated that it alone would be worth $200 million.
Mr. Pabst and Mr. Neuendorf have accused their enemies of being art-world outsiders obsessed with the bottom line. This is anathema to them not just because many of their new investments require patience but also because they see themselves as more of an art company than a tech company. The Spiegel article likened Mr. Neuendorf to “a Bruce Willis of the art world, cool, fearless, perceptive and courageous,” and detailed his hitchhiking to Paris to sell Chagall after WWII. He started a gallery in Berlin in the ‘60s where he offered works by Rauschenberg, Lichtenstein, Warhol and Johns, and was so ahead of his time that he had trouble finding buyers.
“Sergey, I think it’s very clear that he intends to buy himself an identity in the art world,” Mr. Neuendorf said. “It was the same thing that Louise McBain,” now known as Louise Blouin, who has started a competing price database at her Blouin Artinfo, “has been doing: buying properties in the art world in order to be a part of it.”
While that might hold some appeal for Mr. Skaterschikov, who recently purchased Austria’s flagging Viennafair, his partners most likely see an attractive return on investment—a company to be acquired on the cheap, and then turned around. Mr. Weng, a longtime Artnet associate, has attended many shareholder meetings in the past 10 years, invariably delivering long-winded speeches on what he views to be the mismanagement of the company. His last speech, he said, lasted an hour.
“It’s not difficult to see what the problems of Artnet are,” Mr. Weng told us, listing among other issues the need to better market the company’s online auctions. Asked if he would recommend cutting the size of the Artnet staff, he said “Yes, of course.” “Why do you have to hire 130 people in Manhattan to put in data into a database? You do that in India or somewhere else in the world. Why do you need to have an Internet company in the Woolworth building?”
The Weng-Skate alliance is not without its supporters. One shareholder, who asked not to be named “in case the current management team survives this,” said he hoped the insurgents were successful in wresting control of the company. As he sees it, Artnet could grow in a number of directions besides analysis and auctions; he even threw out the idea of an Artnet mutual fund that might offer shares in individual artworks, a market that even non-art companies like SecondMarket have entered. With regard to the leadership of the company, his feeling is that “anybody would be better” than the Neuendorfs.
“They’ve taken a ‘build it and they will come’ approach,” said the shareholder. “Look at the chairman’s letter from the most recent annual report. I thought that was terrible. If you look at it, [Mr. Neuendorf] was comparing himself to Mark Zuckerberg, basically saying 2011 was the year of the Internet and that they’d be successful by the simple fact that they were on the Internet.”
Tied up in the looming proxy battle at the shareholder meeting was the fact that, even if Mr. Neuendorf was a visionary in founding Artnet, he had not offered a clear plan for succession. It’s unclear the extent to which Mr. Pabst’s being named CEO changes the dynamic between the dissenting shareholders and management. Mr. Weng likened Mr. Pabst’s being named CEO to a “Putin-Medvedev” power-sharing agreement.
Mr. Skaterschikov, however, said it was in the “Continental Europe” tradition to give deference to a named successor in situations such as these, and while he had intended to go into the shareholder meeting with the goal of firing Mr. Neuendorf, he implied that Redline would now be willing to work with Mr. Pabst on developing the company in a direction more favorable to their ideas.
“We still want to know what, strategically, the supervisory board members and management want to do,” Mr. Skaterschikov said. “And obviously we would like to hear the strategic plans of the company, but given that Jacob is now taking over as the CEO, it’s perfectly okay if he asks for more time to present the strategic plan, at the shareholder meeting.
“But I don’t think he needs a year,” he said.
The outcome may not be as drastic as both parties have speculated. Mr. Neuendorf has considered the creation of a proper advisory board, one that would have a greater role in the management of the company than the supervisory board currently does, and he’s offered Mr. Skaterschikov a seat on it. In the meantime, Mr. Neuendorf has done his best to buy up new shares in the company, though he’s only managed to buy one more percent since the spring. Until then, it’s just a matter of waiting until the shareholder meeting, which, in a best-case scenario for Mr. Neuendorf, will feature nothing more taxing than another long speech from Rüdiger Weng.
Updated 1:40 p.m. With a few new quotes and some editing tweaks.
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