News & Press
Weng Fine Art plans to increase stake in Artnet and aims for drastic transformations
1 Juni 2022 / Pressemitteilungen
artnet AG (Artnet) is a global leading art company associated with Weng Fine Art AG (WFA), which is operating in the marketplace, media, and data business. Currently, WFA, together with the largest WFA shareholder, Rüdiger K. Weng A+A GmbH, has negative control of Artnet, but the holding is still below the threshold of 30 %, where WFA would have to launch a takeover offer to all other shareholders.
WFA’s Management and Supervisory Board have decided to increase the shareholding in Artnet to just under 30% for the time being, if opportunities for an acquisition arise. WFA considers Artnet's assets (brand name, website traffic, data) to be very valuable in today's market environment, if they are properly leveraged by an experienced management team in the interest of the company. For WFA a collaboration between the two companies on the operational level is of importance. .
Recently, Artnet published its annual report on the fiscal year 2021 as well as the interim statement for the first quarter of 2022. These show notable revenue growth in important sub-segments. However, as in the past, these sales increases did not lead to any profits - on the contrary, profitability even worsened further. While in 2020, with the help of US government support payments, a consolidated profit of USD 2,193k could still be reported, the year 2021 showed a group loss of USD 941k. Development costs of USD 673k were capitalized; otherwise, the losses would have increased further by this amount. In the first quarter of 2022, the loss already totaled USD 786k. Despite further increasing sales, the loss trend has accelerated once again.
In total, Artnet has accumulated a group loss carryforward of nearly USD 53 million since going public in 1999. As a result, the company has not been able to pay out a single dividend to its shareholders in 23 years. Currently, only approx. USD 5 million (after USD 5.9 million in 2020) remains as reported equity, which does not even reach the nominal amount of the share capital.
According to the management of WFA, Artnet's difficult economic situation has for years been rooted in weak economic and strategic management. The cost structure in particular is extremely unfavorable for a company of this size. In addition, WFA sees considerable corporate governance deficits: Hans Neuendorf, who is now 85 years old, "controls" his son, who is the sole member of Artnet's Management Board, via the Supervisory Board in the self-proclaimed "family business". Furthermore, Neuendorf installed his son Albert as Chief Strategy Officer in the Artnet management. Son Henri was responsible for editorial content and is now Contemporary Art Specialist, the daughter-in-law heads the newly founded NFT Department, and daughter Sophie is responsible for corporate communications, which additionally pays external consultants.
From WFA’s perspective, Artnet's practice of awarding positions to family members leads to excessive conditions that are not in line with their performance. In addition, despite his above-average compensation as a member of the Supervisory Board, Hans Neuendorf has been receiving a "consultant's fee" since 2012, which amounted to a total of EUR 336k in 2021 alone and appears to the WFA like a "disguised retirement pension".
Despite the sales increases, Artnet has not been able to initiate a profitable growth campaign in recent years or even to finally complete the FALCON program initiated back in 2017 to renew its technology and increase efficiency. As the 2021 results of WFA subsidiary ArtXX AG show, art market e-commerce is growing very strongly. However, Artnet is hardly active in the most important segment, online art dealing, and has not communicated any strategy in this regard to this point.
According to WFA's assessment, Artnet can only become economically successful with the support of a financially strong partner. With resources from a capital increase, Artnet could consolidate and expand its position on the art market. In order to enable the necessary options for optimizing and restructuring, it is absolutely essential that the Supervisory Board, which has been dominated by Hans Neuendorf up to now, is replaced at the upcoming Annual General Meeting. This will be the only way for Artnet to carry out the necessary capital increase. In addition, there will have to be changes in the operational management.
A large number of discussions held by the management and the Chairman of the Supervisory Board of WFA with members of the Neuendorf family in 2020/2021 about restructuring and repositioning Artnet have essentially failed because the 85-year-old family patriarch Hans Neuendorf has insisted on his family having full control of the company via the Supervisory and Management Board, even though Galerie Neuendorf AG only owns around 27% of the shares in Artnet.
On May 27, 2022, WFA notified Artnet in accordance with §43 of the German Securities Trading Act (WpHG) (notification requirements for holders of significant shareholdings) that it is seeking changes in the composition of the management and supervisory bodies as well as changes in capital resources. As previously disclosed, WFA's shareholding is of a strategic nature and it will continue to expand it as opportunities arise. Furthermore, on May 27, 2022, WFA made a request to the Management Board and Supervisory Board of Artnet to convene the Annual General Meeting, as it has still not been scheduled more than three weeks after the adoption of the balance sheet.