Two weeks ago, it was announced that the record-setting November sale of the 59.6 ct. Pink Star, which dealer Isaac Wolf bought from Sotheby’s for $83.1 million on behalf of a consortium, was canceled. This follows two other canceled sales of top-dollar jewels—one at Sotheby’s, one at Christie’s—both linked to the same person in 2011.
So, is this something we’ll be seeing more of?
“Defaults happen rarely,” says Sotheby’s spokesman Darrell Rocha. “Our purchaser default rate is immaterial in relation to the total volume of transactions brokered by Sotheby’s.”
Veteran auction watcher Ettagale Blauer agrees: “I don’t see this a trend. I just see this as a series of unfortunate occurrences.”
What makes this last occurrence especially unusual—and the reason Sotheby’s had to disclose it in its SEC filings—is that the Pink Star is now sitting in the auctioner’s inventory. Its valuation is $72 million—$11 million below its reported price—which Rocha says “is the U.S. dollar equivalent of the corresponding purchase price in Swiss francs.” (In its SEC filing, Sotheby’s said that it reversed the related auction commission revenues. It called $72 million the “net realizable price” for the stone.)
The sale was “guaranteed,” Rocha says, which explains why it wasn’t returned to the consigner.
Blauer says such guarantees are often offered to attract premium stones: “In this case the consigner might have said, ‘I’ll take my guarantee, thank you very much.’ ”
Perhaps the biggest question is why the stone wasn’t sold to any of the underbidders at their final price, which is what happened in 2011. According to Sotheby’s, three other people vied for the stone.
Sotheby’s declined comment on this. Blauer theorizes that either: 1) the other bidders backed out or 2) the stone carried what she calls “an unreasonably high reserve.” (The now-canceled winning bid set an all-time record for any jewel ever sold at auction.)
As for what happens now, in a conference call following the release of its financial results, its chief financial officer said: “We are currently in discussions with the buyer while also considering other alternatives.” In its financial filing, Sotheby’s said it has “reserved all of its rights and remedies against the defaulting buyer.” (Wolf did not return a call from JCK.)
Rocha declined to say if the stone will go up for auction again but adds: “Sotheby’s has great confidence in the desirability of the Pink Star because of its extraordinary rarity and quality. Sotheby’s is comfortable owning such a rare and valuable object.”
Still, it is an auction house, not a gem wholesaler, and one would have to assume that it is eager to get the stone off its hands.
“With something that enormous, the best bet is it will be sold privately to somebody,” Blauer says. “Someone can come along and say I will take it off your hands, privately and quietly.”
Anyone want to buy a 59.6 ct. pink?