In a Sotheby’s auction in November, a New York diamond cutter defeated three bidders to win the most expensive gemstone ever. Yesterday, the auction house said the buyer couldn’t pay.
The 59.6 carat oval-cut pink diamond, which fetched $83.2 million in a transaction guaranteed by Sotheby’s, was acquired by the auction house after the buyer defaulted. The stone is recorded in Sotheby’s inventory at about $72 million, the U.S. dollar equivalent of the corresponding purchase price in Swiss francs, Sotheby’s said yesterday on a conference call.
“We are currently in discussions with the buyer while also considering other alternatives,” Patrick McClymont, Sotheby’s chief financial officer, said during a conference call with investors. “In the meantime, we are comfortable with our valuation and see real value in owning the diamond at this price.”
The Nov. 13 sale was seen as a sign of market buoyancy and a high-profile success for Sotheby’s, which has faced pressure from investors, including hedge-fund billionaire Dan Loeb, to become more competitive. Loeb yesterday indicated he may engage in a proxy contest after New York-based Sotheby’s didn’t accept his proposal to add three directors backed by Third Point LLC to the company’s board.
Third Point, the largest shareholder of Sotheby’s with a 9.5 percent stake as of Feb. 26, proposed the company add Loeb; Harry Wilson, who helped restructure General Motors Co.; and jewelry designer Olivier Reza to the board, according to a filing with the U.S. Securities and Exchange Commission.
Loeb, whose firm oversees $14 billion out of New York, in October called on Sotheby’s Chief Executive Officer William Ruprecht to resign, criticizing the company’s executive compensation, internal operations and “deteriorating” competitive position. Sotheby’s last month said it would pay a $300 million special dividend and it may sell real estate to hand back more cash to shareholders.
Fourth-quarter earnings at the auction house rose 37 percent to $90.7 million, or $1.30 a share, from $66.1 million, or 96 cents, a year earlier, Sotheby’s said yesterday. The company’s shares fell 6.3 percent to $47.20 at 9:48 a.m. in New York trading, extending its decline to more than 11 percent this year.
“Taking back the guaranteed Pink Diamond hurts revenue,” David Schick, an analyst at Stifel Financial Corp., said in a research note, adding he’s “not concerned with the Pink Diamond selling.”