AXA XL: Underwriting Case Study Series

This week I had the pleasure and honor to present a 2024 art market recap to underwriters at AXA XL Insurance.

Finishing 2024, statistics of decline could be seen everywhere, particularly when comparing overall year-to-year sales totals (i.e., 2024 with 2023 and especially 2022), and yet the overall picture is a more nuanced one. Broadly speaking, my presentation complicated the overarching correction narratives that have prevailed in the press.

Fluctuations in supply, particularly at the highest end, often depend on circumstantial factors such as the availability of major estates. As such, any comparison to 2022 will be skewed by the Paul Allen auction (especially) and the Ammann sale.

The failure of any lot to sell at auction for over $50 million in the first half of 2024 did look paltry given the offerings in the immediate past, but in the second half of the year, the three highest lots at auction totaled $255.4 million, over double the total of the three highest lots sold in the first half of the year.

The price realized for the Magritte alone ($121.6 million) was similar to the total of the prices realized for the three highest lots sold during the first half of the year, and the fact that it sold for over $25 million more than a confident estimate (with guarantee) suggests that present demand is strong in the market for highest-end masterpieces, when in fact there is supply.

As such, when Zachary Small asked in a doom-and-gloom article on November 2, 2023, whether the art market “will need to discount its masterpieces,” the answer seems to be a resounding, “NO” – at least not at the high end of the markets.

In 2024, collectors chased high-end non-art masterpieces as well, such as the stegosaurus skeleton, Dorothy’s ruby slippers, and Babe Ruth’s “called shot” jersey, which respectively shattered auction records for fossils, movie memorabilia, and sports memorabilia, collectively underscoring the expansive cross-sector outlook of the trophy market at present.

Other markets, however, were indeed cooler. The middle market remained artist-specific, with a continued trend toward selectivity for some artists. And in 2024, the market for many emerging artists fully collapsed, following a moment of rapid speculation-oriented growth in the covid period.

Also addressed in my 2024 market recap were notable developments such as:

1. The reuturn of the acceptance of cryptocurrency as payment for auction lots, by Sotheby’s for Cattelan’s Comedian.

2. The seismic security breach that took place in May when Christie’s website was hacked, making it inoperable during the marquee sale week.

3. Sotheby’s overhaul and subsequent reversal (less than a year later) of their fee structure, both for buyers and for sellers. The implications of this are also covered in my recent contribution for Artnews.

Duchamp, Koons, and Cattelan

Yesterday, Scott Lynn of Masterworks posted an article to LinkedIn titled “Why We Think Maurizio Cattelan’s $6.2M Banana Might Not Be a Smart Investment. Although I agree that one cannot necessarily expect "Comedian" to continue to appreciate (and certainly not at the same exponential rate that it has the past few years), I think that some of his logic and substantiation is worthy of critique (especially No. 3).

1. Lynn says that “market trends don’t favor Cattelan’s work.” He cites an 80% decrease in total auction sales prices of Cattelan since 2010, “signaling that his broader market trajectory is declining.”

However, one must be cautions not to assess an artist’s overall market simply by tracing relative annual sales results, which depend in no small part on the content of the consignments. For example, nothing like "Him," Cattelan’s sculpture of Hitler, which fetched $17,189,000 at Christie’s, New York in 2016, has been offered publicly for sale. If it were, one should expect a strong price, perhaps particularly in the wave of the current spectacle surrounding the artist.

2. Lynn states that “conceptual art has limited market appeal.” While I don’t necessarily disagree that conceptual art presents certain marketing challenges relative to traditional physical art, Lynn’s generalized statement may not apply to a particular and truly iconic work, which indeed, “Comedian” became, practically the minute it was first exhibited at Perrotin’s booth at Art Basel Miami Beach in 2018. Exceptional works do not necessarily conform to generalized rules.

In an attempt to substantiate the claim that "conceptual art has limited market appeal," Lynn cites a 1999 sale of Duchamp's "Fountain" (i.e., readymade urinal) for $1.6 million. However, Lynn (of all people) should know that the markets for modern and contemporary art have transformed fundamentally in the past quarter century. If "Fountain" were to be offered today and marketed as deftly as “Comedian” was by Sotheby’s, I have no doubt that it would be estimated at, and sell for a much stronger price than it did in 1999.

3. Lynn says that “editions could dilute value.” Here, in reference to “Comedian”, which is an edition of 3 + artist’s proofs, I emphatically disagree. Of course, a print from an edition of 50 will almost certainly be significantly less valuable than a unique work by the artist. This, however, is not the case for many small editions, such as those of certain sculptures.

The best example to demonstrate this point my be Jeff Koons's "Rabbit", which sold for $91.1 million at Christie's, New York in May 2019. This remains the highest auction price realized for a living artist. It is from an edition of 3 +1 artist's proof.

One might even surmise that in certain circumstances such as that of "Rabbit", the distinguished collections of the other editions can propel the price that prospective collectors are willing to pay for the rare available edition. Similarly, if another edition of "Comedian" were to be offered for sale, the spectacle of the edition sold at Sotheby’s last month may add to interest.

Banksy and the Banana

When appraising art, the most relevant comparable sales are usually those by the same artist. If there are no appropriate comps, one may, by necessity, look to other artists. Find yourself appraising a Mantegna painting with no useful auction sales in 20+ years, you might look at the recent Botticelli sales to gain an understanding of present demand for significant Italian Renaissance paintings.

Doing such is relatively uncommon when appraising contemporary art, particularly by well-known artists whose works sell regularly at auction and privately. Yet, if I were appraising Maurizio Cattelan’s Comedian, the duct-taped banana that sold this week at Sotheby’s, New York for $6.2 million against an estimate of $1-1.5M, I would do just that.

Comedian is hardly alone within Cattelan’s oeuvre to trade in shock value, not even among works that have sold publicly. Known for his 18-karat gold toilet, America, created for the Guggenheim in 2016, Cattelan’s auction record was set the same year when, that May, one of three editions of Him (2001), a slightly under-life-size sculpture of Hitler sold for $17,189,000 for at Christie’s, NY. And yet, chilling as it may have been, this sculpture (an edition of which sold to Holocaust survivor Stefan Edlis) caused no great media spectacle, nor, perhaps more fundamentally, did it cogently pose any essential questions about the status of art itself.

It was not another Cattelan, but rather a Banksy that had me convinced that Comedian would perform far beyond its estimate, and enormously above its primary-market realized price of $120,000 at Perrotin’s booth at Art Basel Miami Beach in 2018. The appreciation rate of 50x seems about right given the sentiment that it tapped, as well as the attendant press, now coupled with deft marketing.

The best comparable is, in my view, the Banksy, formerly known as Girl with Balloon, which sold, considerably above estimate, for $1,364,669, at Sotheby’s London; upon hammering, the painting dropped and partially shredded. The owner kept the work, and the stunt became an instant media sensation. The shredded Banksy was offered again just three years later, again at Sotheby’s London, this time with a lofty estimate of £4,000,000 - £6,000,000 ($ 5,473,340 - $ 8,210,010), and it made multiples, fetching, with buyer’s premium £18,582,000 ($ 25,426,401), a new record for the artist.

Notoriety sells, without question. But why does a work become notorious? The commonalities extend beyond mere shock. Cattelan’s conceptual modified-readymade and Banksy’s shredded painting share tropes of self-destruction and decomposition, each updating concepts explored by artists for generations. Further, both fundamentally question the meaning and limits of what constitutes a work of art. For these reasons, I consider Love is in the Bin to be a pertinent comp for Comedian, arguably the most pertinent — and its repeat(-ish) sale in 2021 for 18 times higher than the 2018 sale is what caused me to believe that Comedian would soar as it did.