Jill Wagner: Joining us now in an exclusive interview is Tad Smith,
Jill Wagner: CEO of Sotheby's.
Jill Wagner: Tad, congratulations.
Tad Smith: Thank you.
Jill Wagner: How did this deal come together?
Tad Smith: Well uh,
Tad Smith: uh we're going to go into the details in the proxy.
Tad Smith: But in general, uh, Patrick, uh,
Tad Smith: approaches and, and made his interests known, and, um,
Tad Smith: he followed a very professional approach
Tad Smith: and the board thought it was a,
Tad Smith: a terrific opportunity for the shareholders and
Tad Smith: frankly for the company going forward. So we're thrilled.
Jill Wagner: What is the expectation in terms of how
Jill Wagner: this is gonna revitalize Sotheby's?
Jill Wagner: We've seen the stock fall
Jill Wagner: almost 40 percent in the past year,
Jill Wagner: although there clearly it's still a market out
Jill Wagner: there for that luxury art space.
Jill Wagner: How does this better your position?
Tad Smith: Well, one of the interesting things about it is
Tad Smith: Sotheby's operating performance has been very strong,
Tad Smith: um, and the stock has not necessarily reflected that.
Tad Smith: So one of the things that we
Tad Smith: thought was really exciting at this point in
Tad Smith: our time is our
Tad Smith: investment program and digital initiatives,
Tad Smith: we thought would be better, uh,
Tad Smith: served in a private environment and, uh,
Tad Smith: and Patrick is a long
Tad Smith: term investor with a long term view,
Tad Smith: and that should be, uh, uh, behoove
Tad Smith: both clients and employees.
Tim Stenovec: Well, Sotheby's has been
Tim Stenovec: a publicly traded company for decades at this point.
Tim Stenovec: What can you do specifically as
Tim Stenovec: a private company that you can't do as a public company?
Tad Smith: Well, you can do lots of things both
Tad Smith: as a public and a private company.
Tad Smith: Um, one of the things that
Tad Smith: a private context with a long term shareholder can do
Tad Smith: is it can invest in different ways and
Tad Smith: shapes potentially than a public company.
Tad Smith: And in this case, uh, the board thought
Tad Smith: that this was a great opportunity for
Tad Smith: our current shareholders to realize
Tad Smith: a return in life perhaps
Tad Smith: and partly in light of what you said.
Tad Smith: But also, uh, thought that it was great for
Tad Smith: the clients and the employees
Tad Smith: going forward. So we're excited about it.
Jill Wagner: Is the client experience gonna change at all?
Tad Smith: The clients experience already has been changing.
Tad Smith: We've been investing very significantly to
Tad Smith: offer both a better event space,
Tad Smith: a phenomenal digital offering, and all of these things.
Tad Smith: I think we're one of the reasons why,
Tad Smith: uh, uh, Patrick was excited about the opportunity.
Tim Stenovec: I'm curious about millennials.
Tim Stenovec: We talk a lot about millennials here on Cheddar.
Tim Stenovec: How do you get millennials
Tim Stenovec: more interested in art? How do you get them [inaudible 00:01:59]?
Tad Smith: Well, it- it's passing a significant portion of, uh,
Tad Smith: the folks who are buying right now from us,
Tad Smith: many of them buy the way online,
Tad Smith: are actually under age 40.
Tad Smith: Um, and so one of the things I'm really
Tad Smith: excited about with our new, uh, um,
Tad Smith: prospective new owner is he
Tad Smith: has a real sense for technology, uh,
Tad Smith: and his family is got
Tad Smith: a real sense for understanding
Tad Smith: how to reach those markets,
Tad Smith: and so we look forward to working with them very closely.
Tim Stenovec: That- that's so interesting for me to hear.
Tim Stenovec: That's not something I was assume-
Tim Stenovec: assuming about the, the company.
Tim Stenovec: I mean, what kind of art are, are,
Tim Stenovec: are people in that demographic are we interested in?
Tad Smith: Well, remember that 60 percent of
Tad Smith: what we sell, this is not a new thing,
Tad Smith: but 60 percent what we sell is under $10,000,
Tad Smith: and so there are all sorts of things you
Tad Smith: can buy. You can buy cufflinks.
Tad Smith: You can buy moon dust.
Tad Smith: You can buy interesting scientific gears.
Tad Smith: You can- there are many, many things we can sell,
Tad Smith: and much of it affordable,
Tad Smith: uh, uh, more affordable to affluent people.
Jill Wagner: How does Sotheby's and the art world adjust to
Jill Wagner: a prolonged trade war
Jill Wagner: that we're seeing a lot of volatility.
Jill Wagner: We know over time foreign buyers have been
Jill Wagner: some of the biggest buyers of art,
Jill Wagner: and also to just questions
Jill Wagner: about economic growth going forward.
Jill Wagner: How do you hedge against that and
Jill Wagner: plan for that at Sotheby's?
Tad Smith: Yeah. Great questions.
Tad Smith: Well- we- let me step back and say
Tad Smith: one of the things that's amazing about
Tad Smith: Sotheby's is it's been around for 275 years.
Tad Smith: Now, part of that, you could hear a sort of,
Tad Smith: uh, a statement about legacy.
Tad Smith: But part of it you should hear is it's
Tad Smith: an enduringly powerful business model.
Tad Smith: It has survived wars,
Tad Smith: plagues, trade wars many, many times over.
Tad Smith: It's the sort of business model that
Tad Smith: is acts as- and sort of
Tad Smith: global presence where it adjusts very frequently.
Tad Smith: It's a very lightweight flexible asset, uh, or, uh,
Tad Smith: asset light model, and
Tad Smith: it's one of the reasons why I think investors,
Tad Smith: uh, such as Patrick appreciate it.
Tad Smith: Um, what that means specifically for trade, uh,
Tad Smith: situation is we will adapt,
Tad Smith: and we have for centuries and we'll continue to adapt.
Jill Wagner: Uh, one of the other things that we've seen
Jill Wagner: impacting this market is hedge funds.
Jill Wagner: Oftentimes, billionaire,
Jill Wagner: hedge fund owners here in United States,
Jill Wagner: big buyers, and investors and
Jill Wagner: [inaudible 00:03:47] over the past several years really since uh,
Jill Wagner: rates have been low, ever
Jill Wagner: since the Fed has driven those rates low,
Jill Wagner: we haven't seen that hedge
Jill Wagner: fund outperformance that we saw
Jill Wagner: per se in the '90s and in the early 2000s.
Jill Wagner: Has that impacted your business?
Jill Wagner: And are there ways to work
Jill Wagner: around that so that it isn't a drag?
Tad Smith: One of the things that's really interesting about
Tad Smith: the most recent sales that we had, uh,
Tad Smith: in New York is that you saw a tremendously, uh, um, uh,
Tad Smith: strong appetite for masterpieces
Tad Smith: for significant quality works of art,
Tad Smith: and the buyer ship was from all over the world.
Tad Smith: So, um, uh while I can't
Tad Smith: say that any particular segment
Tad Smith: of our customers are up or down,
Tad Smith: the global portfolio of demand
Tad Smith: looks attractive at the moment,
Tad Smith: and, uh, we feel good.
Tim Stenovec: What about volatility in
Tim Stenovec: the US markets and i- in public markets around the world?
Tim Stenovec: How does that type of volatility affect assets like art;
Tim Stenovec: like the assets that you sell?
Tad Smith: Well asset, uh, the great thing about art
Tad Smith: is it's a very long term asset,
Tad Smith: and so up and down volatility or,
Tad Smith: or changes to the VIX in the near term shouldn't, uh,
Tad Smith: materially affect it, uh,
Tad Smith: in the sense that it's a long term asset.
Tad Smith: Um, i- in terms of our business, uh,
Tad Smith: short term volatility can
Tad Smith: put a little bit of noise into the system.
Tad Smith: But, uh, the truth is when
Tad Smith: great stuff comes up to market,
Tad Smith: people are taking a long term view just like Patrick.
Jill Wagner: What's gonna be your working relationship with
Jill Wagner: Patrick moving forward when the deal closes?
Tad Smith: Well, Patrick is the owner, and, uh,
Tad Smith: he will make, uh, the decisions
Tad Smith: about what he wants to do at management.
Tad Smith: I can tell you with respect to
Tad Smith: myself and my team, we love our business,
Tad Smith: we're committed to it, and we're committed to,
Tad Smith: uh, uh, serving our clients and getting our job done.
Jill Wagner: Do you anticipate more resources in
Jill Wagner: getting that job done once the deal closes?
Tad Smith: Uh, it's too soon to say.
Tad Smith: Um, and, um, we'll see.
Tad Smith: But I know wha- what I do
Tad Smith: anticipate is that he will bring great strength and
Tad Smith: insight on how to deploy resources to do
Tad Smith: really innovative things per- and
Tad Smith: see things in a way that perhaps we haven't been looking.
Tim Stenovec: Well, um, here's about those innovative things.
Tim Stenovec: What do you anticipate the biggest technological changes
Tim Stenovec: coming to the industry i- in the next few years?
Tad Smith: Well, the three that we've had all- under way already is
Tad Smith: how do we use technology to make
Tad Smith: things really easy to bid?
Tad Smith: How do we make- use technology to make things really
Tad Smith: easy to consign or to sell through us?
Tad Smith: And then how do we think about applications of
Tad Smith: machine learning and other artificial technologies
Tad Smith: to improve our processes?
Tim Stenovec: What about virtual and augmented reality?
Tim Stenovec: Any the idea of, of actually making
Tim Stenovec: these pieces of art available
Tim Stenovec: to people around the world in,
Tim Stenovec: er, er, environment of virtual reality?
Tad Smith: I love that question because on
Tad Smith: June 28th, Friday of this week,
Tad Smith: we're opening the Chatsworth exhibition in New York City,
Tad Smith: and we're going to have an AR component
Tad Smith: of that, and everyone should come see.
Tad Smith: It's free and open to the public.
Jill Wagner: All right. Sotheby's stock up 57 percent, uh, today.
Jill Wagner: It looks like it's trading near
Jill Wagner: its highest level in at least 12 months.
Jill Wagner: Tad Smith, CEO of Sotheby's,
Jill Wagner: congratulations, and thanks for joining us.
Tad Smith: Thank you for having me on Cheddar.
Tad Smith: It's great to be here.
Tim Stenovec: Thanks, Tad.
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