Ultra-Contemporary Art Falls Flat at London Sales

Art by young contemporary artists performed well at auctions in London this week, but few flew off the auction blocks in a frenzy as had been the case through early last year.

That led the total value of evening sales of works by artists under the age of 45 to sink 80% from a year ago to £1.9 million (US$2.41 million), according to the London art analysis firm ArtTactic. The total value of young contemporary art sold at evening auctions this week was also 63% lower than at the London evening auctions in February, which itself represented a 25% drop in value from a year earlier.

An uncertain global economy, high inflation, and persistent geopolitical conflicts, combined with the fact these sales come at the tail end of a brisk season of art buying at both auctions and fairs, likely all contributed. Also, the evening sale totals this June didn’t include Phillips, which opted to only offer a day sale.

At least a quarter of Phillips “20th Century to Now” auction on Friday of more than 100 works were by ultra-contemporary artists, a category the auction house has long led. But four lots on the block failed to find buyers, including paintings by Shara Hughes and Harold Ancart. With only a few exceptions, most others sold within presale estimates.

A standout was the very last lot of the sale: Belgian artist Albert Willem’s All in All Not Bad For His First Attempt, 2021, depicting an airplane with plumes of black smoke that landed in the middle of a city intersection, sold for £180,000, before fees, several multiples of a £15,000 high estimate.

Anna Weyant, Cloud Hill, 2020, which sold at Phillips for a hammer price of 225,000. Courtesy of Phillips

All-in-all, Phillips’ auction realised only £7.15 million, before fees, below a presale estimate range between £8.6 million and £12.3 million, according to ArtTactic. With fees, the sales brought in £9.1 million, with 84% of lots sold, Phillips said.

Overall evening sale results at Christie’s and Sotheby’s declined 22.1% from a year ago to nearly £219 million, before fees, with only five lots selling for more than £5 million, including Gustav Klimt’s Lady with a Fanfor a record price of US$108 million at Sotheby’s on Tuesday.

One reason ultra-contemporary works didn’t spark lofty bidding at this week’s sales is that many of the works weren’t the best examples from these artists, says Morgan Long, managing director of the Fine Art Group, a London art advisory.

According to Long, galleries have been cracking down on “flipping,” that is, buying works on the primary market and selling them soon afterward via the auction houses. The result: “You’re not getting access to and putting into auction really great primary material,” she says.

And, Long says, “most people who want good primary [works], have access” to them. A buyer who wants to see great works by Caroline Walker—a popular Scottish contemporary artist—can find high-quality examples at her gallery, Stephen Friedman in London. Lesser quality examples head to auction, she says.

There were three works by Walker sold at Phillips, including Reception, 2013, which sold for a price before fees of £140,000, below expectations.

Buyer hype for younger contemporary artists also cycles in and out of fashion. In May 2022, works by Anna Weyant led three evening sales in New York. This spring, sightings of Weyant works were scarce. Cloud Hill, a 2020 portrait by the artist sold for £225,000, before fees, at Phillips, below a £250,000 low estimate.

Currently, artists such as Michaela Yearwood-Dan, Julien Nguyen, and Sahara Longe are gaining more attention. “There are all these new ones that have cropped up in between the old guard of the young and the new guard of the young,” says Naomi Baigell, managing director at TPC Art Finance in New York.

Buyers, Baigell says, “are probably looking to see what they can get that doesn’t fly out of the saleroom. And because we’re still in this political and financial environment, the eye is much more discerning when they’re thinking of acquisitions.”

And, she says, collectors “want to start with artists that are going to increase in value, not ones that have increased in value.”

The price points for most works by young contemporary artists often fit the bill. During the London evening sales tracked by ArtTactic, three of the top five performing works were by young contemporary artists Louis Fratino, Yearwood-Dan, and Guglielmo Castelli. The top-selling young artists were Walker, Amoako Boafo, Fratino, Ahmed Mater, and Yearwood-Dan.

But newer collectors to the market are also drawn to newer works and to the access to the art world buying these pieces can provide. Since the start of the pandemic, these combined factors have drawn in a wider group of newer, often younger collectors in addition to seasoned buyers, Baigell says. That’s a far broader swath of individuals than those able to buy a Klimt for US$108.4 million.

Galleries are responding to this trend by seeking out and bringing in younger artists. For all these reasons, Baigell believes the ultra-contemporary art segment will continue to thrive and drive interest in the market.

“We’re going to be seeing a lot more of this 21st-century [art] be what is exciting to watch at auction,” she says.

Berkshire began liquidating its big stake in the banking company in mid-July—and has already unloaded about 15% of its interest. The selling has been fairly aggressive and has totaled about $6 billion. (Berkshire still holds 883 million shares, an 11.3% interest worth $35 billion based on its most recent filing on Aug. 30.)

The selling has prompted speculation about when CEO Warren Buffett, who oversees Berkshire’s $300 billion equity portfolio, will stop. The sales have depressed Bank of America stock, which has underperformed peers since Berkshire began its sell program. The stock closed down 0.9% Thursday at $40.14.

It’s possible that Berkshire will stop selling when the stake drops to 700 million shares. Taxes and history would be the reasons why.

Berkshire accumulated its Bank of America stake in two stages—and at vastly different prices. Berkshire’s initial stake came in 2017 , when it swapped $5 billion of Bank of America preferred stock for 700 million shares of common stock via warrants it received as part of the original preferred investment in 2011.

Berkshire got a sweet deal in that 2011 transaction. At the time, Bank of America was looking for a Buffett imprimatur—and the bank’s stock price was weak and under $10 a share.

Berkshire paid about $7 a share for that initial stake of 700 million common shares. The rest of the Berkshire stake, more than 300 million shares, was mostly purchased in 2018 at around $30 a share.

With Bank of America stock currently trading around $40, Berkshire faces a high tax burden from selling shares from the original stake of 700 million shares, given the low cost basis, and a much lighter tax hit from unloading the rest. Berkshire is subject to corporate taxes—an estimated 25% including local taxes—on gains on any sales of stock. The tax bite is stark.

Berkshire might own $2 to $3 a share in taxes on sales of high-cost stock and $8 a share on low-cost stock purchased for $7 a share.

New York tax expert Robert Willens says corporations, like individuals, can specify the particular lots when they sell stock with multiple cost levels.

“If stock is held in the custody of a broker, an adequate identification is made if the taxpayer specifies to the broker having custody of the stock the particular stock to be sold and, within a reasonable time thereafter, confirmation of such specification is set forth in a written document from the broker,” Willens told Barron’s in an email.

He assumes that Berkshire will identify the high-cost Bank of America stock for the recent sales to minimize its tax liability.

If sellers don’t specify, they generally are subject to “first in, first out,” or FIFO, accounting, meaning that the stock bought first would be subject to any tax on gains.

Buffett tends to be tax-averse—and that may prompt him to keep the original stake of 700 million shares. He could also mull any loyalty he may feel toward Bank of America CEO Brian Moynihan , whom Buffett has praised in the past.

Another reason for Berkshire to hold Bank of America is that it’s the company’s only big equity holding among traditional banks after selling shares of U.S. Bancorp , Bank of New York Mellon , JPMorgan Chase , and Wells Fargo in recent years.

Buffett, however, often eliminates stock holdings after he begins selling them down, as he did with the other bank stocks. Berkshire does retain a smaller stake of about $3 billion in Citigroup.

There could be a new filing on sales of Bank of America stock by Berkshire on Thursday evening. It has been three business days since the last one.

Berkshire must file within two business days of any sales of Bank of America stock since it owns more than 10%. The conglomerate will need to get its stake under about 777 million shares, about 100 million below the current level, before it can avoid the two-day filing rule.

It should be said that taxes haven’t deterred Buffett from selling over half of Berkshire’s stake in Apple this year—an estimated $85 billion or more of stock. Barron’s has estimated that Berkshire may owe $15 billion on the bulk of the sales that occurred in the second quarter.

Berkshire now holds 400 million shares of Apple and Barron’s has argued that Buffett may be finished reducing the Apple stake at that round number, which is the same number of shares that Berkshire has held in Coca-Cola for more than two decades.

Buffett may like round numbers—and 700 million could be just the right figure for Bank of America.

Ultra-Contemporary Art Falls Flat at London Sales

When will Berkshire Hathaway stop selling Bank of America stock?