Sotheby's Falls to 16-Month Low on Art-Price Concern
Date: 23 Jan 2008 | | Views: 3180
Source: Bloomberg (www.bloomberg.com), by Linda Sandler
Sotheby's, the world's largest publicly traded auction house, fell to a 16-month low in New York on worries that a recession may drag down art prices.
Sotheby's now lags behind the Standard & Poor's 500 index after enriching investors for five straight years. It slipped as much as 8.8 percent today, compared with a 3.1 percent fall in the S&P 500, before both rebounded. For the year, Sotheby's is down 22.4 percent, or more than twice as much as the S&P, which has lost 9.1 percent.
"People are concerned that the art market is weakening,'' said Lawrence Creatura, a portfolio manager with Clover Capital Management in Rochester, New York. "The market for all assets appears to be slowing.'' Clover Capital is a Sotheby's holder.
Sotheby's, which investors use as a proxy for the art market, is lagging behind the S&P 500 after two years of accelerating growth. Aided by sales of high-priced art to new billionaires from the U.S., Russia and Asia, the auction house said last week that the value of works it sold in 2007 rose 51 percent to $6.2 billion from a year earlier.
Now a slowing U.S. economy is rattling consumers around the world. Growing concern that losses from subprime mortgages will cause the global economy to slow has battered European shares and sent more than 45 of the world's 68 markets with at least $10 billion in value into bear markets.
"As worldwide markets weaken, it could impact our worldwide wealth-accumulation thesis,'' said analyst George Sutton at Craig-Hallum Capital Group of Minneapolis. His buy recommendation on Sotheby's stock, which he owns, has been based in part on signs that emerging-market billionaires were funneling some of their growing wealth into art, Sutton said in an e-mail.
Sotheby's closed at $29.46, down 85 cents or 2.8 percent in New York Stock Exchange composite trading. The shares soared 22.8 percent last year, or more than six times the S&P's rise.
Sotheby's European chairman of contemporary art, Cheyenne Westphal, said she hasn't seen signs that the market is cooling as the auction house prepares for its February sales in London. There are potential buyers from Europe to China for a Francis Bacon painting valued at about $35 million, she said in an interview yesterday in New York.
Sotheby's strategy is to pursue desired works that command high prices and to keep estimates "attractive'' on other lots, Westphal said. "We're in a climate where we have to prove ourselves.''
Tiffany & Co., the world's second-largest luxury jewelry retailer, cut its profit forecast on Jan. 11 after a drop in holiday sales.
"High-end retailer concerns over the past couple of weeks have led some to conclude that auction demand could be impacted as well,'' analyst Sutton said.
Sotheby's slide today follows a dive of as much as 38 percent on Nov. 8, the most ever, after a Vincent van Gogh painting drew no bids at an impressionist auction in New York. The stock fell as much as 13 percent the next day after Sotheby's disclosed a $14.6 million loss on auction guarantees.
At Clover Capital, Creatura said art may hold its value in a recession better than other assets such as commodities, since there are no new supplies of dead artists' work.