Art Finance

I have posted a fair amount on art finance in the past. Bloomberg recently posted on a art transaction which include third party guarantees. As auction houses work with consignors and convince them to sell, they are and have been using guarantees. In the past, the auction houses took the risk, now third party guarantees are in vogue and bring more of an art as an investment view into the transactions.

Bloomberg reports

Art Finance
“The hedge funder’s new Ferrari” is not Italian, fast or even a car, according to financier-turned-art dealer Asher Edelman. It’s a high-octane financial maneuver tied to the sale of artwork that’s part insurance policy, part betting slip.

Offering a guaranteed minimum price to those putting fine art on the block has become standard at top auction houses. Sellers like knowing that works won’t go unsold. In return, if the art sells for more than the guarantee, some of the profit above the prearranged bid goes to the guarantor.

To offload risk, auction houses are negotiating more “irrevocable bids”—also known as “third-party guarantees”—with investors who may see it as a display of financial prowess. With the art market peaking, opportunities abound but carry greater risk and should be approached with caution.

The biggest profit for a guarantor was last year’s auction of Leonardo da Vinci’s “Salvator Mundi” at Christie’s. Guaranteed to sell for more than $100 million, the painting was hammered at $450 million. Philip Hoffman, founder of the London-based Fine Art Group, estimated that the guarantor made as much as $150 million.

For those on a tighter budget, a Chinese company  plans to finance the purchase of a $75 million Michelangelo painting by issuing 7.5 million restricted shares at $10 a pop. Yulong Eco-Materials Ltd. said it’s offering “the opportunity of its acquired masterpieces to anyone with a brokerage account.”

Source: Bloomberg

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