Sotheby’s made a strong case to reject Loeb’s slate: source

A Sotheby's employees re-hang LS Lowry's painting 'Piccadilly Circus, London' in London, England.
Peter Macdiarmid | Getty Images

With less than a month to go until Sotheby's crucial annual shareholder's meeting in New York City, the battle between the storied auction house and activist investor Dan Loeb is growing more contentious.

In an SEC filing on Tuesday, Sotheby's attacked Loeb's past service on corporate boards, specifically pointing out his time as a Yahoo director and calling his exit a "self-interested transaction."

Later in the evening, a source close to Sotheby's told CNBC's Scott Wapner that Loeb's actions on Yahoo's Board, "raised serious questions".

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"Loeb says he's [there] for shareholders but when he had the chance to cash out at Yahoo, he took it," the source said.

Sotheby's has also sharpened it's response to Loeb's recent letters, with the same source telling CNBC that "Loeb's been long on rhetoric and short on facts, and the facts don't support the rhetoric."

Last Friday, Loeb sent a letter to Sotheby's shareholders in which he attributed the recent decline in the art auction house's stock to "failed leadership by the board of directors." Shares have fallen from a recent high of $50.61 in late February to around $42.05 at Tuesday's close.

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He also claimed that the board has too little "skin in the game," noting it collectively owns less than 1 percent of the company. Third Point -- Loeb's hedge fund -- is Sotheby's biggest investor with a 9.6 percent stake.

Loeb has nominated three new members to Sotheby's Board, including himself, and is urging Shareholders to vote for his slate at the upcoming shareholder's meeting. He says the nominees "will bring fresh perspectives" to the company, which he says suffers from "poor corporate governance."

Sotheby's rejected Loeb's plan and is offering its own slate.

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Sotheby's maintains that it's confident it will win shareholder support at the upcoming meeting with the source telling Wapner the auction house has made a "strong case."

Sotheby's annual shareholder's meeting is on May 6.