Sotheby's offer oversubscribed

SOTHEBY'S latest offering to the public - 10 million common shares - was snapped up by institutional bidders yesterday, despite a dormant market for the art auctioneer's usual wares.

Although the dollars 125m ( pounds 66.8m) offering almost doubled the number of Sotheby's shares available to the public, Sotheby's share price in fact rose on the New York Stock Exchange after the sale, as some of the buyers decided to resell in the after market. The shares were trading at dollars 12.75 at midday yesterday, 25 cents above the dollars 12.50 offering price.

The issue, which leaves chairman Alfred Taubman with a controlling stake in the 250- year-old auction house, was over-subscribed, forcing it to allocate shares among the buyers. Two million were sold to European bidders.

'It went like a dream,' said the syndicate spokesman John Carney, an investment banker with Lazard Freres in New York. Mr Taubman alone, who accounted for 8 million of the shares on sale, took in dollars 100m.

Despite a 'road show' before the offering that visited 16 cities in five countries, a number of analysts had worried about investor interest, given the two-year slump in auction sales and Sotheby's shaky portfolio of art-buyer loans.

'It's simply remarkable this market wasn't saturated, particularly as it has had more than its share of questions about the recovery of the art market,' said Tony Russ of Dominick & Dominick, an investment advisory firm.

When Sotheby's Holdings last came to the stock market in 1988, buyers were rewarded with a fourfold gain on their investment, as the art market boomed around the world. But the recession has caused the wealthy to hold off selling their holdings, waiting for a recovery in the economy that would help sustain the price records set back in 1989.

In a two-week period that year, Sotheby's raised more than dollars 500m at auction. At a comparable one this May, the auction house raised dollars 79.7m, although this spring's sales were 33 per cent up on last year. Sotheby's is also exposed to dollars 187m worth of loans to art collectors, 11 per cent of them designated to its 'watch list'.

But the art market 'has definitely bottomed out', said Brian Fernandez, a San Francisco art dealer, and weak auction prices have created a considerable backlog of works that will have to come to market sooner or later.

'Sotheby's is situated to be the prime beneficiary of that recovery when it happens,' Mr Fernandez said.