NEW YORK, NY.- What happens to the Basquiat market now that the top buyer is the seller?
Japanese tech billionaire Yusaku Maezawa made an emphatic public entrance into the highest echelon of the art world with his 2016 purchase of Basquiats Untitled for $57.3m at Christies, New York, setting a world record for the artist at auction.
Maezawa was not finished however, purchasing another Basquiat work (also titled Untitled) the following year for $110.5m, once again setting a new world record at auction. By paying nearly double the unpublished estimate of $60m, Maezawa may have been bidding against the Basquiat boom he himself sparked the previous year.
Maezawa was not only setting records, but establishing his place as an influencer in the contemporary art world and the cultural world in general. As is often the case, the value of art can't just be measured in the enjoyment of living with a work or its potential future financial returns. For Maezawa, the social media and press buzz of these acquisitions has played a pivotal role around his brand and future cultural value (particularly if he follows through with his stated plan to open a museum for his collection).
Heading back to the auction block, Untitled will be offered at Phillips, New York this May.
In the graph, above the 2004 price of $4.48m was high, but not significantly above other prices achieved by Basquiat works auctioned during that time, selling just inside the estimate of $3.2-4.5m (£1,800,000-2,500,000). However, the 2016 price of $57.3m for Untitled was an unexpected result considering the 2004 price of $4.48m generated a projected 2016 price of $27,514,463 based on Basquiats historical performance at auction.
The $57.3m result (over 2x the ARTBnk projection) generated a CAGR of 26.8%, which is in line with Basquaits highest returns (Top 20%). These types of returns generated by overpayment typically occur when theres a lack of supply in the market. In this case there was a motivated buyer quoted as saying, "...I just had to buy it. The moment I saw it, I made the decision. But yes, it was expensive."
This begs the question, what happens to the Basquiat market now that the top buyer is a seller?
The upcoming sale of Untitled provides an opportunity to take measure of the Basquiat trophy market. Part of the story has been told, with an unpublished estimate of around $70m with a rumored guarantor. For Maezawa to achieve the same CAGR as the seller in 2016, Untitled would have to sell for a new world record of $198.9m. Crazier things have happened, but a more likely $70m sale price would generate a CAGR below 4.45%, inline with Basquiat's bottom 20% of returns. This would invert the performance from 2016 from the top 20% of Basquiats returns to the bottom 20% of returns. It is a clear illustration that typically, overpayment proportionally reduces future returns.
The next chapter in Basquiats market story will unfold at Phillips this May. Will the most desirable Basquiats continue to produce exceptional returns, or has Basquiat reached a plateau? We eagerly await the result.