What 'The Scream' Record Sale Means For Art & Collectibles (BID, AMZN, EBAY)

Sotheby’s (NYSE: BID) is almost magically trading lower this morning on a sell-the-news reaction after the auction house (and oldest listed company on the NYSE) posted a record auction price of $119.9 million for Edvard Munch’s ‘The Scream.’  What is interesting is that there had not exactly been a huge clamoring of investors ahead of what was supposed to be a record-breaking event.

Original estimates in the media were put at roughly $80 million for the last of four versions of ‘The Scream’ that was still in private hands.  This auction fetched almost 50% higher than the expectation, although there was speculation that the $80 million price was an understatement.

In recent weeks we had noticed that Sotheby’s stock price had recovered from $36.50 to above $39.00 but that is still shy of the $40+ high in March and still well under the 52-week high of $48.90.  The luxury art market does have price-sensitivity when it comes to the economy and sellers and buyers were reluctant to trade at the end of 2011 when it looked as though Europe might take the global growth story away from the U.S. economy.  That makes it interesting that Sotheby’s is down 2.6% at $38.08 on a day where the market is down only about 0.2%.

The business of ultra high-end collectibles and art is a tricky one and it is a business which many outfits want a piece of.  We have noted earlier this year how the baseball collectible world had two of the famous T206 Honus Wagner tobacco card for sale and how the 100-year old card is now worth millions of dollars in the higher grades.  Another sale has recently taken place with a reported sale of more than $1 million.

eBay Inc. (NASDAQ: EBAY) sells art, baseball cards, and other high-end items.  It has had large sales before, but generally the ultra-high priced items are reserved for specialty auction houses or consignment houses.  Amazon.com, Inc. (NASDAQ: AMZN) even has collectors envy because it recently launched a store site for selling sports collectibles.  Again, neither is ever likely to become the venue for the highest priced collectibles but it is obvious that both have noticed the importance of these markets.

This is the world of extreme alternative investing.  The price of participating has just gone up.

Sotheby’s is hard to invest in for any one event and for any single quarter.  The take here is that if a record has been set at a premium of 50% higher than the estimate of two months ago, this may drive other art collectors to consider releasing some of their prized collection pieces if they think the premium is this high.  That is going to be good for Sotheby’s if that turns out to be the case.

JON C. OGG