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For months, the art world had been wondering: Would the biggest guarantee in auction history pay off? Would Sotheby’s come out ahead, break even or be left holding the bag on a $515 million commitment to the collection of its disgraced former chairman, A. Alfred Taubman?
Now the results are in.
On Friday, the auction house announced that it expected to lose $12 million in the fourth quarter of 2015 as a result of the Taubman sale, because of a revenue shortfall and related expenses. The company also said it would eliminate its quarterly cash dividend, which had been in place since 2006, a move the company estimated would save $27 million to $28 million.
“As a result of the guarantee shortfall, no net auction commission revenue will be recognized for the Taubman collection in the fourth quarter of 2015 or in 2016,” Tad Smith, the president and chief executive of Sotheby’s, said Friday morning in a conference call with analysts and investors to report the latest earnings.
Sotheby’s beat Christie’s for the collection — which ranges from old masters to 20th-century masterworks — by offering its record-setting guarantee to the family of Mr. Taubman, who went to prison for his role in a price-fixing scandal with Christie’s and died last April. There was considerable skepticism in the art market about whether Sotheby’s had overpaid, and dire predictions that the auction house would take a bath.
The consensus now seems to be that the Taubman gamble was unfortunate, albeit unavoidable.
“You can see the competitive challenges in losing something that close to you, but they were kind of taken to the cleaners,” said George Sutton, an analyst at Craig-Hallum. “Hopefully, there’s never a scenario like that again.”
Mr. Smith maintains that the Taubman guarantee is not a sign of things to come, that Sotheby’s will carefully weigh the risks in undertaking future commitments.
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