Loeb Raises Stake in Sotheby’s and Seeks Board Seat

The activist investor Daniel S. Loeb wants to join the board of Sotheby’s and has called for the chief executive to step down.

“Sotheby’s is like an old master painting in desperate need of restoration,” Mr. Loeb, the manager of the hedge fund Third Point, wrote in a letter to William F. Ruprecht, the chairman and chief executive of Sotheby’s, the auction house. Mr. Loeb also disclosed that he is now the company’s biggest shareholder with a 9.3 percent stake in the company. Both the letter and disclosure are included in a filing with the Securities and Exchange Commission.

“As with any important restoration, Sotheby’s must first bring in the right technicians,” Mr. Loeb added. He wants to join the board immediately and recruit several new directors, as well as a new chief executive.

In a carefully worded reprimand, Mr. Loeb outlined what he called “chronically weak operating margins and deteriorating competitive position relative to Christie’s” â€" Sotheby’s main rival â€" and said he was not persuaded by management’s explanation for lower market share relative to Christie’s.

Mr. Loeb, who is a prominent art collector, is agitating for change at the top of the company, contending that a “crisis of management” has created “dysfunctional divisions and a fractured culture.”

Third Point first disclosed it had a 5.7 percent stake in the auction house through an S.E.C. filing on Aug. 26. Two other activist investors, Nelson Peltz and Mick McGuire, have also made recent investments in the company. Mr. Peltz’s Trian Partners has a 3 percent stake and Mr. McGuire’s Marcato Capital has a 6.6 percent stake.

Two weeks after Third Point’s disclosure, the company announced it would review its financial policies and would consider a share repurchase or increasing its dividend. In a statement, Mr. Ruprecht said, “All are complex.”

This was not enough for Mr. Loeb, it would appear. On Wednesday, he called the response a “belated announcement partially addressing poor capital allocation practices.”

“Sotheby’s malaise is a result of a lack of leadership and strategic vision at its highest levels,” he said. Mr. Loeb also attacked Mr. Ruprecht’s pay package, $6.3 million in salary in 2012, and limited stock holdings, adding that it had created a misalignment with shareholders.

A Sotheby’s representative could not be immediately reached for comment.