Sotheby's Stock Takes a Tumble

Late last week Bloomberg published an article on the falling value of Sotheby's stock. Even after a record breaking first half of 2011, the stock has slid close to 40%. The stock closed on Friday at $35.19 a bit up from earlieer in the week when it was at $33.44. Of course given the recent financial news and across the baord stock market decline of the past week, it is not unreasonableor unexpected for  Sotheby's stock price to suffer as well. Perhaps the more concerning aspect is the downward trend of the stock over the past several months from an April high of about $55.00.  The decline continues even with high profits just recently reported.

The rationale for the price decline seems to be concerns over a world wide recession, and this of course can impact many within the arts and associated fields such appraising.

There are also many reports that high net worth individuals as well as corporations are keeping cash, in the past we have seen art used as an alternative investment strategy, so perhaps money will flow into the art market. As I mentioned yesterday on the decline in the Mei Moses All World art index, the art fall season will be a very interesting one for appraisers, dealers and colectors.

Bloomberg reports

Sotheby's shares plunged as much as 20 percent today amid concern that the art market rally since the 2008 financial crisis will fizzle.

Shares of the publicly traded auctioneer closed down $5.17, or 13 percent, to $33.44, and are off 39 percent since their April 5 high this year. In the past three sessions, they’re down 16 percent.

Stocks around the world have tumbled as investors fretted about a global relapse into recession. Late Friday, Standard & Poor’s cut the U.S. credit rating.

“Global financial equity markets are a proxy for global wealth,” said Rommel Dionisio, an analyst with Wedbush Securities, who has an “outperform” rating on the shares. “There’s reason for concern. It depends on how pronounced or severe this downturn is.”

On Aug. 3, Sotheby’s reported its best-ever quarterly profit of $127 million, with record sales of $3.4 billion for the first half of 2011. In a conference call after the earnings release, Chief Executive Officer William Ruprecht said he believed “market volatility” around the world “in other arenas” has encouraged participation in the art market.

Ruprecht also referred to economic volatility “that the media is awfully good at frightening people with on a daily basis.”