Skate’s Resumes Analysis of artnet AG

July 30, 2012

August 8 Annual Shareholders Meeting Set to Seal artnet’s Fate

artnet AGM Voting Dilemma Explained; Vision for a New artnet

On May 25, 2012, Skate’s suspended its analysis of artnet. At that time, the share price was EUR 5.1, Hans Neuendorf was the company’s CEO and the entire stream of news surrounding the firm, its 2011 and Q1 2012 results, growing competition in the e-commerce space and defection of galleries to other online platforms all pointed in a single direction: a continuous decline of artnet and the demise of its business model.

We suspended analysis because Skate’s had been retained to advise Redline Capital Management SA, a Luxembourg-based asset management firm and at that time a syndicate of Redline and German-listed Weng Fine Art AG, on developing a turnaround strategy for artnet AG.

Two months later, and the inside information that required Skate’s to suspend analysis is now in the public domain…

Please click here to download and read the full edition of Skate’s Market Notes.

Skate’s Art Investment Review – Semiannual Report – July 2012

July 17, 2012

Another record season is over, and one can almost feel the global elites pouring yet another large glass of art market absinth for themselves, becoming absorbed by the pleasant illusion of financial heaven brought about by their art investments, ducking their long term economic worries in their decorated palaces, and even expanding private museums or spacious safety vaults (secure storage for high-value art is one of many high growth art industry segments, after all).

The statistics for the art trade in the first six months of 2012 do indeed portray a blossoming marketplace that enjoyed greater liquidity, better returns and more price records all while ignoring a cracking global economy, stagnation in China, a collapsing EU fringe and continuous soul searching for a new sense of direction in the U.S.

Yet despite the rosy numbers, the focus of our semiannual report is not the high-end segment of the art market. Yes, as usual, we cover it with lots of statistics, but in a way the story has become boring. For years, it has been much the same story, over and over again. The rich get richer, put more capital in art that is already fully priced, and enjoy the opportunity to perceive the value-preserving qualities of masterpieces along with the branding opportunities that come with owning prestigious artworks. This has greatly driven up both the returns and benefits for those art market institutions that have focused on the premium segment, notably the leading auction house duo of Christie’s and Sotheby’s, the Grand Slam of the art fairs (now consolidated throughout the year into three Basels, two Friezes and one TEFAF, with FIAC and Armory left to ponder whether it’s worth remaining in the race) and, finally, the high-end galleries.

Apart from private political and social foundations or charitable activities aimed at education and healthcare, intellectual spending on tangible assets like art and private museums provides one of the few opportunities for the wealthy to stoke their egos. Ego stoking has served and continues to serve as a powerful source of growth in the high-end art market. But unlike most charitable activities, one can actually make money in the process, or, at the very least, preserve most of the capital allocated to collecting.

Let us take just a quick look at the high-end art market results for the first half of 2012 before moving on to the core focus of our report—the crystallization of the art consumption industry and its most interesting opportunities for value creation…

To download the full report, please click here.

Abbey House: Rapid Growth Continues as Company Prepares to List Art&Business Magazine

July 11, 2012

The summer of 2012 is expected to be busy for Poland’s Abbey House, as the company is preparing to list Art&Business Magazine, which is the next step toward achieving the ambitious team’s goal of creating a prominent art market in Poland and simultaneously being a leading player in that country. Established in 2010 and publicly listed last year, Abbey House has impressed market watchers both by the speed of its development as well as by the amount of activity carried out on the tiny Polish art market. In this issue of Skate’s Market Notes, we examine the state of Abbey House on the eve of its listing of Art&Business Magazine.

Abbey’s growth is obvious. Since its inception, the company has doubled its market capitalization, which now stands at $30 million, a figure that is comparable to long-term players artnet and Weng Fine Art. Revenues are also growing tremendously, $8.3 million in 2011 compared to $1.3 million the year before.

This rapid development can be attributed to the company’s dynamic activities directed at three main parts of their business. By working to create strong players from the ground up, all of Abbey’s business units are meant to complement one another and serve the purpose of establishing the Polish art market on both the local and global level, thus positioning Abbey as the key expert when it comes to contemporary Polish art.

First, Abbey House is a contemporary art auction house that serves as a sales platform for established contemporary art as well as artworks owned by Abbey. The latter include paintings that are continuously created by a group of 12 diverse artists that Abbey financially supports and promotes. Carefully selected by artistic experts and approved by Abbey’s board, these artists are recent graduates in search of patronage. Although Abbey is also a young company that has yet to be fully established, the strategy seems to be working. For example, Anna Szprynger, the top artist represented by Abbey who specializes in geometric art priced around $5,000 per work, is currently having a personal exhibition at a major Polish institution—the National Gallery in Sopot. In 2011, Abbey House sold 245 artworks, the most valuable of which fetched PLN 40,000 (approximately $12,000). Although relatively low by global standards, these figures are nevertheless quite significant for the small Polish market.

An art investment fund, the second part of Abbey’s business mix, is also a unique structure for the Polish art market. Abbey Art Fund invests in SPVs that later transfers funds into both public and private firms in the art market, global art funds, collections and particular works of art (e.g., Polish icons such as Wojciech Fangor). The fund always leaves 20% of its assets in cash. As of June 29, 2012 the net asset value of Abbey Art Fund stood at PLN 10,021,000 ($2.9 million). The price per certificate over that period grew to PLN 111.44 from an initial price of PLN 100.00 (August 8, 2011). The Abbey Art Fund is therefore providing its 90 mature investors with returns on alternative assets. Abbey claims the investment potential for Polish art is high as, according to the company’s calculations, repeat sales have brought positive returns over the last several decades.

Art&Business Magazine, acquired in 2010, is the third part of the company’s business mix and is Abbey House’s next big bet. Created in 1989, it is the oldest magazine about art in Poland and has only undergone a slightly rebranding while under Abbey ownership. In 2010, Abbey acquired 60% of the magazine from Rempex Ltd., the oldest Polish auction house. It later acquired an additional 21% stake. Along with the magazine, the company obtained a complete database of all hammer price records from last two decades on the Polish market, a valuable tool that is gradually being commercialized by the team.

During the pre-IPO process in April 2012, Abbey decided to release old Series A shares, thus decreasing its position back to 61% (10 million shares). The sale of 2 million shares went successfully, raising PLN 1.00 ($0.30) per share. For the third quarter of 2012, Abbey has scheduled a flotation of 10 million shares of Art&Business at NewConnect, Warsaw’s alternative stock market. The current market capitalization of the magazine is small at PLN 10 million ($3 million). Revenues are showing rapid growth, however. In 2011, they barely reached PLN 1 million (almost $300,000) and resulted in a loss, but in the first quarter of 2012 Abbey was finally able to reap the rewards of its efforts, with the first three months resulting in revenues of PLN 440,000 ($130,000) and bringing a net profit for the first time since the acquisition.

Given that Abbey’s performance since listing has been declining over the past year, the magazine listing is a somewhat curious decision. In addition to the inherent difficulties in running a profitable magazine business, Abbey could very well confront the Polish art scene itself a possible competitor. With the absence of strong market players, local art society could eventually be scared off by a company that seeks to play all possible roles simultaneously. It appears as though Abbey House is not threatened by these risks, however, as it remains absolutely confident in its preparation for the magazine’s flotation.

In order to enhance its chances of success, Abbey’s team is approaching journalistic activity in a dynamically different way. First, due to the rich expertise of Abbey’s management, the company is closely cooperating with luxury car brands represented in Poland, which gives it access to the country’s most affluent customers—Abbey’s target audience. To widen its audience, the magazine recently began publishing a shorter and lighter version specifically as an insert for local financial and luxury goods magazines. The magazine also appears in gift sets during major fashion events in Warsaw. Thus, the magazine provides three sources of revenue for Abbey: B2B agreements with luxury goods companies, individual subscribers and free distribution. Finally, Abbey has set up a series of videos called Artoholic that feature Polish celebrities discussing their opinions on art. All of these activities show that Abbey is interested in reaching the country’s wealthiest individuals.

Poland is currently seeing rapid growth in its citizens’ wealth. In admitting Poland’s national habit of luxury goods consumerism, Abbey expects the Polish art market to create new top brands represented by contemporary artists. Yet instead of acquiring simply another luxury product, Abbey is proposing an alternative, highly intelligent way of channeling wealth through the collection of the country’s national heritage. To serve this purpose, Abbey also conducts regular educational programs aimed at investors and, perhaps somewhat ironically, at children. As Abbey’s leading educational and entertainment tool, the magazine serves to further the company’s purpose of creating a Polish art market that will occupy its place on the global art scene.

YTD Performance of Abbey House vs. Skate’s Art Stocks Index vs. S&P 500

Monthly Art Investment Ideas – July 2012

July 2, 2012

This issue of Skate’s Art Investment Review focuses on the most important auction results in June, as well as major upcoming sales at Christie’s and Sotheby’s.

In this Issue:

  • New Entries to Skate’s Top 5000 in June
  • Old Masters Market: Significant Downturn in Demand Signifies Low Investment Potential
  • Top 3 Art Investment Ideas for July 2012
    • Willem van de Velde The Younger: A Calm – A smalschip and a kaag at anchor with an English man-o’-war beyond
    • Willem van de Velde The Younger: The Surrender of the Royal Prince During The Four Days’ Battle, 1st – 4th June 1666
    • Joseph Mallord William Turner, R.A.: Mont Blanc from Fort Roch, Val d’Aosta

To read the full report, please click here.


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