Risky Business - Auction Houses Guaranteeing Top Lots

Scott Reyburn of Bloombergs is reporting that Sotheby's and Christie's are both guaranteeing minimum sales amounts for many paintings in this weeks sales in London showrooms. The auction houses are taking a risk at the top end of the market, and will have to pay consignors the guaranteed amount even if the hammer prices dont reach the guarantee. Reyburn states that more than half of the low estimate lot value totals in the Sotheby's sale are guaranteed. Specifically 10 of the 64 lots at the Sotheby's sale are guaranteed for a total of $27 million. While Christies is guaranteeing approximately 38 percent of its low estimate lot value totals.

Reyburn reports "Everything appears to be on hold at the moment,'' said the London-based art adviser Tania Buckrell Pos, who represents high- net-worth clients in both the developed and emerging economies. ``Everyone has a budget, even if they're a billionaire. These people know when to be prudent. At this time, some of my clients are balancing the decision to buy art against other assets.''

Reyburn continues "The mood has changed over the last couple of weeks,'' said Anderson Peterson , founder and managing director of the London- based art market research company ArtTactic . ``The magnitude of the economic crisis is such that even the ultra-rich will have second thoughts about buying things.''

Click HERE to read the full Bloomberg article.

If I recall correctly a few years ago Sotheby's stock price dropped because of guaranteed consignments. It will be interesting to see what happens this week in London. If the sales are strong, there could be additional confidence, if the returns are poor, there certainly would be reason for continued concern. As reported previously on the AW Blog, Sotheby's stock price has taken a rather big hit over the past month or two, although that can be expected due to the overall decline in financial markets. Yet many believe the lower Sotheby's stock price is due to declining markets and lower than expected sales during the recent Asian sales. It will be interesting to see how the sales perform this week at both Sotheby's and Chrisitie's.