8 ms·

Anatomy of a $70M Auction Flop

26 points by prismatic 1y ago

deleted 1y ago
[deleted]
aurizon 1y ago
Russian fools, AKA 'oligarchs' are thin on the ground these days
- betaby 1y ago
  https://www.theguardian.com/us-news/2024/jan/31/russian-billionaire-dmitry-rybolovlev-sothebys-auction-fraud-case-art-salvator-mundi https://www.theguardian.com/us-news/2024/jan/31/russian-bill...
  - aurizon 1y ago
    Yes, these oligarchs got into conspicuous consumption oligarchic competitions on art, yachts etc. Most of this $$ was looted by resource fraud and military procurement fraud that pretty much ruined their military. I recall reading about supposed military encrypted radio the Kremlin paid $10,000 each for were common radios(Walky-Talky types) that were worth under $100 as well as Chinese tires - Ukraine heard every word.
abxyz 1y ago
I read this article yesterday and I am still confused by it. "...carried a pre-sale estimate of over $70 million..." "...the artwork came to the market without a minimum price guarantee from the auction house..." "Oliver Barker, the evening’s auctioneer, began the bidding for the bust at $59 million. But his bids stalled at $64.25 million. Three minutes passed as he hunched low over the rostrum, hunting for bidders, Nosferatu-like, until announcing that the lot was a pass." Can someone explain how these things relate? If the pre-sale estimate was $70m, there was no minimum price guarantee (a reserve?) and a bid of $64.25 million (90% of the estimate) why didn't it sell? The article goes on to say: "“No one who is an informed buyer who is serious in this market — billionaire or not — is going to pay what essentially amounts to a 50 percent premium on something that sold in recent memory,” said Todd Levin, an adviser in New York." Someone was willing to pay $64.25 million, a 30% premium on the last sale, $70 million is only 40%. Where does 50% come from? Why is $64.25 million bad but $70 million is good.
- windowliker 1y ago
  >why didn't it sell? If I had to guess it would be something to do with this part: "Solow, auction experts said, had a history of not seeking guarantees, choosing to negotiate for a portion of the buyer’s fees instead. Last night that strategy proved fateful." The vendor and the auctioneer have some private agreement, which meant the sale probably ended below an acceptable price.
  - geoffreymcgill 1y ago
    My understanding is that the $64.25M in "bidding" wasn’t real, as it was likely done with chandelier bids. Essentially fake phantom bids placed by the auctioneer to simulate interest and push the price upward. It’s a common tactic, but many see it as deceptive, especially when it creates the illusion of genuine demand.
    - torlok 1y ago
      That sounds like wash trading. How is this legal?
      - hiatus 1y ago
        A sculpture is not a security.
      - i_am_jl 1y ago
        Many jurisdictions have laws specifically allowing it, as long as it's disclosed, like in the terms provided by Doyle Auction House: The auctioneer will not specifically identify bids placed on behalf of the seller. The auctioneer may further bid on behalf of the seller, up to the amount of the reserve, by placing successive or consecutive bids for a lot or by placing bids in response to other bidders. https://www.doyle.com/terms/ https://www.doyle.com/terms/
    - maxerickson 1y ago
      Many see it as blatantly deceptive and wonder how someone would argue otherwise.
wewewedxfgdf 1y ago
A better title: $70M bust busts.
windowliker 1y ago
https://archive.ph/eOsl0 https://archive.ph/eOsl0
greatgib 1y ago
Ground to earth opinion, it is crazy the disconnect of our world where people might afford or spend such an amount of money for a simple sculpture that is not that much beautiful or even unique, but just because of collector FOMO or investment based on name dropping of the author. Imagine that it is the equivalent of 7 millions McDonalds meals, or 1000 years of an average US worker salary. All of that just for a decoration object that you will put on top of a chimney. And it is not even like that the original author is rewarded for his own work!
- Projectiboga 1y ago
  This is why John Stewart Mill and Adam Smith advocated for steeply progressive taxes beyond a floor. The income multiplier for the top end of the income spectrum is very low compared to the bottom 40%. From a 1980a text book, the lower income multiplier was 11x, meaning someone earning a subsidence wage will spend it quickly, locally and it will multiply. The top 10%, I dont recall exactly other than a smaller band at top that included high salary taxpayers, not just the wealthy, had a multiplier of 0.4. When one gets to such high assests and income one stops consuming quickly and the resources become stagnent. This is an example of that, this "auction" might genetate some salary for the staff but lots of these millions are just being shifted between wealthy folks with little real world economic effect. This has been slowly strangling amy growth in real income for a majority of Americans ever since the tax code was altered in the 1980s. There have been other cuts in the 90s, 2000s and 2017. The only things delaying the serious effects were the tech advances and rapid population growth, masking this economic drag.
  - twoodfin 1y ago
    Slowly strangling any real growth? https://fred.stlouisfed.org/series/MEHOINUSA672N https://fred.stlouisfed.org/series/MEHOINUSA672N
    - slater 1y ago
      Is there a way to add cost of living increases to that graph?
theamk 1y ago
Key quote (IMHO): > The fear within the auction world is that the bust’s flop could now taint casual perceptions of the overall health of the art market, when it was Sotheby’s, and the seller, who agreed to expose an object of economic importance to the risks of an unpredictable market. In other words: Sotheby's decided not to sell, and now people are considering that paying $70 million for a piece of art might be a crazy idea. Maybe next time a piece of art is being sold for an outrageous price, buyer will instead think: "Wait, what I am doing? Am I really going to get $70M worth of satisfaction from this? And if not, will I at least be able to resell for the same price to next person?"
- ToddLevin 1y ago
  You are incorrect - it was not Sotheby's who decided "not to sell", it was the consigner who set their reserve at $70 million, and would not lower it, even though Sothebys actively suggested that they do so a day or two before the sale took place, knowing that they very well might not have somebody who would be willing to bid at the hammer that high. This was entirely the seller's call, and not the auction house's. The seller simply wasn't willing to part with their artwork for less than they felt it was worth, and they were perfectly fine taking it back if it didn't achieve the desired hammer price. It was their artwork, and their decision.

26 points by prismatic 1y ago

deleted 1y ago

[deleted]

aurizon 1y ago

Russian fools, AKA 'oligarchs' are thin on the ground these days

betaby 1y ago
https://www.theguardian.com/us-news/2024/jan/31/russian-billionaire-dmitry-rybolovlev-sothebys-auction-fraud-case-art-salvator-mundi https://www.theguardian.com/us-news/2024/jan/31/russian-bill...
- aurizon 1y ago
  Yes, these oligarchs got into conspicuous consumption oligarchic competitions on art, yachts etc. Most of this $$ was looted by resource fraud and military procurement fraud that pretty much ruined their military. I recall reading about supposed military encrypted radio the Kremlin paid $10,000 each for were common radios(Walky-Talky types) that were worth under $100 as well as Chinese tires - Ukraine heard every word.

abxyz 1y ago

I read this article yesterday and I am still confused by it. "...carried a pre-sale estimate of over $70 million..." "...the artwork came to the market without a minimum price guarantee from the auction house..." "Oliver Barker, the evening’s auctioneer, began the bidding for the bust at $59 million. But his bids stalled at $64.25 million. Three minutes passed as he hunched low over the rostrum, hunting for bidders, Nosferatu-like, until announcing that the lot was a pass." Can someone explain how these things relate? If the pre-sale estimate was $70m, there was no minimum price guarantee (a reserve?) and a bid of $64.25 million (90% of the estimate) why didn't it sell? The article goes on to say: "“No one who is an informed buyer who is serious in this market — billionaire or not — is going to pay what essentially amounts to a 50 percent premium on something that sold in recent memory,” said Todd Levin, an adviser in New York." Someone was willing to pay $64.25 million, a 30% premium on the last sale, $70 million is only 40%. Where does 50% come from? Why is $64.25 million bad but $70 million is good.

windowliker 1y ago
>why didn't it sell? If I had to guess it would be something to do with this part: "Solow, auction experts said, had a history of not seeking guarantees, choosing to negotiate for a portion of the buyer’s fees instead. Last night that strategy proved fateful." The vendor and the auctioneer have some private agreement, which meant the sale probably ended below an acceptable price.
- geoffreymcgill 1y ago
  My understanding is that the $64.25M in "bidding" wasn’t real, as it was likely done with chandelier bids. Essentially fake phantom bids placed by the auctioneer to simulate interest and push the price upward. It’s a common tactic, but many see it as deceptive, especially when it creates the illusion of genuine demand.
  - torlok 1y ago
    That sounds like wash trading. How is this legal?
    - hiatus 1y ago
      A sculpture is not a security.
    - i_am_jl 1y ago
      Many jurisdictions have laws specifically allowing it, as long as it's disclosed, like in the terms provided by Doyle Auction House: The auctioneer will not specifically identify bids placed on behalf of the seller. The auctioneer may further bid on behalf of the seller, up to the amount of the reserve, by placing successive or consecutive bids for a lot or by placing bids in response to other bidders. https://www.doyle.com/terms/ https://www.doyle.com/terms/
  - maxerickson 1y ago
    Many see it as blatantly deceptive and wonder how someone would argue otherwise.

wewewedxfgdf 1y ago

A better title: $70M bust busts.

windowliker 1y ago

https://archive.ph/eOsl0 https://archive.ph/eOsl0

greatgib 1y ago

Ground to earth opinion, it is crazy the disconnect of our world where people might afford or spend such an amount of money for a simple sculpture that is not that much beautiful or even unique, but just because of collector FOMO or investment based on name dropping of the author. Imagine that it is the equivalent of 7 millions McDonalds meals, or 1000 years of an average US worker salary. All of that just for a decoration object that you will put on top of a chimney. And it is not even like that the original author is rewarded for his own work!

Projectiboga 1y ago
This is why John Stewart Mill and Adam Smith advocated for steeply progressive taxes beyond a floor. The income multiplier for the top end of the income spectrum is very low compared to the bottom 40%. From a 1980a text book, the lower income multiplier was 11x, meaning someone earning a subsidence wage will spend it quickly, locally and it will multiply. The top 10%, I dont recall exactly other than a smaller band at top that included high salary taxpayers, not just the wealthy, had a multiplier of 0.4. When one gets to such high assests and income one stops consuming quickly and the resources become stagnent. This is an example of that, this "auction" might genetate some salary for the staff but lots of these millions are just being shifted between wealthy folks with little real world economic effect. This has been slowly strangling amy growth in real income for a majority of Americans ever since the tax code was altered in the 1980s. There have been other cuts in the 90s, 2000s and 2017. The only things delaying the serious effects were the tech advances and rapid population growth, masking this economic drag.
- twoodfin 1y ago
  Slowly strangling any real growth? https://fred.stlouisfed.org/series/MEHOINUSA672N https://fred.stlouisfed.org/series/MEHOINUSA672N
  - slater 1y ago
    Is there a way to add cost of living increases to that graph?

theamk 1y ago

Key quote (IMHO): > The fear within the auction world is that the bust’s flop could now taint casual perceptions of the overall health of the art market, when it was Sotheby’s, and the seller, who agreed to expose an object of economic importance to the risks of an unpredictable market. In other words: Sotheby's decided not to sell, and now people are considering that paying $70 million for a piece of art might be a crazy idea. Maybe next time a piece of art is being sold for an outrageous price, buyer will instead think: "Wait, what I am doing? Am I really going to get $70M worth of satisfaction from this? And if not, will I at least be able to resell for the same price to next person?"

ToddLevin 1y ago
You are incorrect - it was not Sotheby's who decided "not to sell", it was the consigner who set their reserve at $70 million, and would not lower it, even though Sothebys actively suggested that they do so a day or two before the sale took place, knowing that they very well might not have somebody who would be willing to bid at the hammer that high. This was entirely the seller's call, and not the auction house's. The seller simply wasn't willing to part with their artwork for less than they felt it was worth, and they were perfectly fine taking it back if it didn't achieve the desired hammer price. It was their artwork, and their decision.