Sotheby’s Earnings Reveals Another Wrinkle on Guarantee Strategies at Both Houses

Bloomberg had story over the weekend that emphasized elements of Sotheby’s guarantee program. The report tried to equate the $8m loss with the gap between Stefan Edlis’s Lichtenstein guaranteed at $50m and its $41.7m premium price as if the rest of the guarantee book zeroed out save for that one painting.

At the same time, the story paired “an investor presentation—one that Sotheby’s PR department had included as a companion to earnings call—which mentions an $8m loss in Sotheby’s guarantee book for the quarter (up from a $6m loss the previous year) with the story of a pair of paintings that Sotheby’s bought outright from a consignor.

“The overall deal was profitable but we take the loss side now and the gain later,” McClymont said on the call.

Sotheby’s lost $8 million in the second quarter on guarantees, according to an investor presentation. This figure excludes auction commissions earned on these guarantees, a spokeswoman said. The auction house doesn’t comment on the profitability of its guarantee portfolio, she said.

Of course, the pair of paintings isn’t part of the guarantee book. Indeed, the fact that Sotheby’s owned the paintings outright is potentially more significant. It seems to be part of subtle trend as of late where both Sotheby’s and Christie’s are, on occasion, circumventing the guarantee process and becoming direct principals in the sales of certain high value works. It would be interesting to know which type of consignor is happier to lock in their profits and let the auction house sort out the risk reward. One also which side of the equation this inchoate trend is driven from: consignor or auction house?

“This painting was acquired along with another painting that was sold at the same auction for an offsetting profit which will be recognized later in the year when payment is received and title passes to the buyer,” Patrick McClymont, […]

One was Gerhard Richter’s fiery 1992 abstract work that fetched $28.2 million against the presale estimate of more than $30 million. The second was Sigmar Polke’s steamy jungle landscape from 1967 that sold $27.1 million, surpassing the $20 million target and setting a record for the late German artist. Minimum Guarantees “The overall deal was profitable but we take the loss side now and the gain later,” McClymont said on the call.

Art, Not Sotheby’s Profit, at Records in Fight for Works  (Bloomberg Business)