SEC Filing Suggests A Windfall Fall for Sotheby's

Sotheby's indicated in a report filed with the SEC yesteraday that it had promised an additional $103.2 million worth of guarantees between a filing on August 7th and the August 23rd report, bringing outstanding guarantees to $378.1 million. A guarantee is the minimum price the auction house promises the consignor that the lot will achieve. If bidding doesn't reach this minimum price, the house shells out the difference from its own pockets. Craig-Hallum Capital analyst George Sutton, quoted in the Associated Press, says, "The substantial level of guarantees suggests that the supply for the key fall auction season will be superb." As mentioned here yesterday, we're waiting to see what star lots Sotheby's has consigned for it's November sales, and the jump in total guarantees in less than a month suggests that the auction house might, in fact, have something to rival Christie's Warhol portrait of Liz Taylor.

Sotheby's also disclosed that it would raise the buyer's premium (the amount above the hammer price that the auction house charges the buyer) on the first $20,000 of a lot to 25%. A 20% commission fee will be charged on the sale price above $20,000 and up to $500,000, and the auction house will collect 12% on the remainder. Previously, the buyer's premium was 20% on the first $500,000 and 12% on the remainder.

The commission hike comes as no surprise, as Christie's made the same move earlier this month. Both increases go into effect as of September 1st.

Sotheby's shares jumped 3.5% ($1.42) to $42.47 yesterday on the heels of the filing. Sutton estimated that the commission hike would increase earnings potential up to 30 cents annually and said that "guarantees typically carry better than average profit potential." But art world blogger Lee Rosenbaum questions this rosy outlook here.