Tuesday, November 26, 2013

The Tricky Thing about Transparency

The feud between artnet AG and Redline Capital Management S.A. (who failed in their hostile takeover bid of artnet back in September 2012, all of which ended up costing a number of my favorite art writers their jobs) continues to play itself out on the pages of Skate's Art Investment Review. Not only do Skate's seem to take every possible opportunity to mock artnet's performance since the bid (artnet AG's stock prices are down to about 2.786 euros compared with the 6.4 euros per share Redline had offered in their takeover attempt a little over a year ago), they are now hinting strongly that artnet stockholders might consider suing the company, because a financial statement its management released shortly before the takeover bid has been revealed to have been "incorrect." The exact words Skate's used in reporting this were "The inaccurate accounts pose a potential threat of major litigation for artnet." 

I'm kind of shocked they didn't publish a sympathetic attorney's phone number.

Skate's argument in the report is that if artnet's shareholders had had the correct financial information, they might not have voted down Redline's offer. Which is fair enough. But context is key to real understanding here. The failed takeover surely sucked for Skate's, who had been hired by Redline to advise on their offer; all of which makes much of the snarky commentary Skate's has published about artnet since then smack of sour grapes.

But that's not why I'm writing about this (I love snark and do think Skate's report contains an important revelation about the information the shareholders were given). Still (and this has been bugging me about Skate's artnet coverage for a while), Skate's is publishing this information within an annoying double standard, in my opinion.  


Skate's promotes itself with the slogan "Transparency For The Global Art Market Since 2004." It's essentially their raison d'etre. They've even co-organized conferences on "trust and transparency" in the art market. And while I think it's debatable whether the art market truly needs more transparency or not, I don't think it's debatable what the word "transparency" means in the context of a market. Investopedia defines it as such:

The extent to which investors have ready access to any required financial information about a company such as price levels, market depth and audited financial reports. Classically defined as when "much is known by many", transparency is one of the silent prerequisites of any free and efficient market.

When transparency relates to information flow from the company to investors, it is also known as "full disclosure".
Now if Skate's were only communicating with hand-selected investors who are well-informed about the interconnections between the companies on their index and Skate's own complex history, I wouldn't be bothering myself with this topic today. But Skate's also operates a news service of sorts, via their blog, and via  Skate’s Market Notes, which is the same articles emailed far and wide as a self-contained PDF file with its header proclaiming its mission of "transparency." Skate's Market Notes covers a finite range of art market topics, such as  "Amazon Diversifies into the Art Market: New Player Has Potential to Dominate the Online Art Trade" or "Living Artists: A Week of Records Sees Strong Performance by Jeff Koons, Christopher Wool, and Gerhard Richter." It's a publication devoted to what Skate's summarizes as "brief articles that focuses on either a particular company from Skate's Art Stocks Index or a unique sale taking place on the auction or private market." It reads a bit chatty, with a generous helping of snark (again, at least where artnet is concerned), but also often includes plenty of data in tables to where it can expect to be viewed not only as reliable, but mostly objective as well.

And so, while they don't call it "journalism," per se, given how it's written and distributed as such, it still behooves Skate's to adhere to their commitment to "transparency" in Skate’s Market Notes as it is understood in the context of journalism, or trustworthy reporting, or even opinion writing. Just as it is in the market context, transparency in journalism, with regards to information flowing from a writer to his/her readers, is also known as "full disclosure." And "full disclosure" is an ongoing process. It's why you hear TV or radio news programs disclose their affiliation with a company they're reporting on, every time, for example. It requires assuming your reader will make decisions based only on what you present to them in each communication, and that if there are any even potential conflicts of interest in your relationship to any of the involved parties, you need to make those clear.

And so it was what I didn't read in Skate's latest Skate's Market Notes (about artnet's financial report) that started to bother me. While it's easy to understand why they wouldn't make a huge deal out of the fact that Skate's founder, Sergey Skaterschikov, is also an Executive Board Member at Redline Capital Management SA (after all, it's been reported before), in the context of a self-contained communication with an analysis and alarming conclusion as serious as this one (you might consider suing), it would seem to deserve at least some mention

Skaterschikov's Linked in profile indicates he ended his official association with Skate's in October 2012 (a month after his client, Redline, failed in their takeover bid of artnet) and that he came on as an Executive Board Member at Redline in March 2012 (when the hostile takeover was presumably in its planning stages). I don't mean to suggest there is anything untoward about these affiliations, but that information would seem critical in a self-contained communication about such a matter. Without that disclosure, for example, a reader might conclude the report is entirely objective and the note about "major litigation" is merely an obvious observation. With that disclosure, however, it would certainly seem a fair conclusion on the part of some readers that perhaps the casual conclusion that lawsuits might be in order isn't so casual after all. Indeed, the more objective-seeming framework of the report without that disclosure is highly convenient for someone still hellbent on seeing a takeover happen here (Skate's noted just in April 2013 that "artnet seems to be screaming for a new takeover suitor. Skate's can bet we will hear about one shortly.")

At the very least, noting the connections in a self-contained report would have demonstrated "full disclosure," the very hallmark of true transparency in any context. In other words, if you're gonna sell your services as a call for transparency, you have to commit to it all the way around.


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