Sotheby’s shares slide amid concern over falling volumes
The share price of auction house Sotheby’s has fallen following the sharp rally which welcomed its record-breaking $86m (€55.2m) sale of the Francis Bacon Triptych to Chelsea football club owner Roman Ambramovich.
Investors are concerned that auction house sales will fall as art buyers become more discriminating during a difficult period for the global economy.
Since October, Sotheby’s price has fallen from $55 to $26.40, after the Bacon rally to $29, which took place in mid-May. For its first quarter to March, announced in early last month, Sotheby’s revealed a net loss of $12.4m, against net income of $24.3m a year ago. Operating expenses rose. Auction and related revenues dropped to $108m, against $130m, although Sotheby’s said the first quarter is a thin time of year.
Philip Hoffman, who manages the UK-based Fine Art Fund, said auction houses depend on high turnover to produce results. An increasing number of them are being forced to guarantee prices to vendors to secure business.
When they are implemented, this leads to immediate writedowns and risk exposures.
In his results statement, Bill Ruprecht, Sotheby’s chief executive, said: “In the first quarter we reduced our auction guarantee risk exposure. We believe it to be an appropriately prudent approach to risk management during this time of greater financial market uncertainty. This necessarily required our agreeing to thinner commission margins.”
Hoffman said: “Where there once were four buyers, there are now probably three. The demand for quality art still exists, but you need to be careful not to target areas which have been overheated.”
Hoffman manages $135m in several funds, including a new fund which targets Middle East art. Over 18 months, a picture by Beatrice Millhazes which he bought for $190,000 and sold for $390,000 has just been sold for $1m.
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