"New" Leonardo, Old Negotiating Tactics

News leaked a few days ago that last year Sotheby’s privately sold a 1506 painting titled Salvador Mundi, recently credited to Leonardo da Vinci after years of alleged misattribution, for between $75-80M. The price caught me off guard. Not because it seemed too high, but because it seemed too low. Consider that just last fall the comparatively prolific Francis Bacon’s triptych of Lucian Freud sold for $142.4M via Christie’s, almost twice the value of Salvator Mundi, thought to be one of only fifteen to twenty paintings ever identified as Leonardo’s.

Highly respected LA Times art critic Christopher Knight expressed a similar sentiment on Twitter this morning. In fact, he took the idea one step further by noting that if the reported sales price was accurate, the buyer acquired it for a 60% discount off the $200M estimate placed on the piece after the re-attribution - a staggering difference in value.

So why and how did this happen? I think there are two factors in play here - one on the buy side, one on the sell side. I’ll try to walk through both quickly. 

Authorship questions are notoriously thorny in the art world. It is impossible to confirm beyond a shadow of doubt whether or not a work discovered at a flea market or inside an attic was actually created by the hand of a deceased all-time great. This is true even of artists who only left this mortal coil in the mid-twentieth century; imagine how much dicier the game grows for one who died in the sixteenth. 

It’s unlikely at this point that new evidence could reverse (or at least re-raise doubts about) Salvator Mundi’s attribution to Leonardo. But it’s not impossible. The risk exists and can never be eliminated. And that fact must affect any sales negotiation. 

A non-art comp is helpful here. As luck would have it, I talked to two friends over the weekend - one who works in mergers & acquisitions, the other in private equity - about how a parallel situation would play out in their own fields. Say their firms were considering acquiring a company, but some percentage of that company’s history or record-keeping was fishy or incomplete. Would the sale be called off?

The answer I got back in both cases was “not necessarily.” Instead, the buyer would generally price the risk of those questionable areas into their offer. Yes, the company potentially being acquired would be worth a higher price if everything about their existence was indisputable. But because questions linger, they’re worth a lower price - or alternatively, the contract would include rebates or full cancellation/refund of the sales price should new information later disrupt the acquired company’s assurances about those grey areas. 

To me, this scenario maps neatly onto the Salvator Mundi sale. Even though the piece is now in good standing as a Leonardo work, its colorful history can’t be denied. Any collector would be foolish not to use those questions to try to drive down her acquisition cost. An unquestionable “new” Leonardo painting might be worth $200M in an open market. But there is no such thing as an unquestionable “new” Leonardo painting, only a Leonardo painting with caveats. And when it comes time for someone to pay actual money for one, doubt and negotiating tactics help shave that $200M estimate down to $75-80M. 

Detail from Leonardo, “Self-Portrait in Old Age” (1512). Image credit: Feel Guide.

The other factor here is on the sell-side. It all comes down to how estimates work in the art world. My experience with auction houses, primarily Sotheby’s, during my gallery career convinced me that the houses use estimates the same way that bookmakers use point spreads: to influence behavior, not to reflect accuracy.

Betting lines are a moving target; they get adjusted to convince bettors to supply action to whichever side of the wager is currently underperforming for the bookmaker. If in the lead-up to this year’s Super Bowl all the money was coming in on the Seahawks, the bookmaker would move the line to make the Broncos a more appealing gamble. There’s a science to it. But it’s psychology, not calculus. 

I liaised with auction houses on probably 20-25 consignments in my six-plus years in the industry. Inevitably, we would get a call from our sales rep the night before or the morning of each auction asking us to lower the estimate from whatever was on our consignment agreement, printed in the catalog, and trumpeted on their website. The buyer interest they thought was there originally hadn’t quite materialized; a lower estimate would spur more bids when the piece’s lot number was called, because collectors would think that they could now nab the piece for less. 

This was infuriating at the time, but it makes sense in the big picture. Before an auction house can sell a work, they have to sell a client on consigning them - not their auction competitors - the piece to offer in the first place. How do they do that? Partially by inflating estimates. Feed a potential consignor’s dream about a massive auction windfall, and she’s more likely to entrust the work to you. The tactic benefits the auction house when they publish the sales catalog, too. The more valuable the works on offer appear to be, the more desirable they become to collectors, gallerists, and dealers looking to buy, and the more luxurious and elite the house appears.

I suspect the same thing happened with Salvator Mundi to some extent. Rediscovering a Leonardo is a once-in-a-lifetime event. Any valuation should reflect as much - not only to capture the historical significance, but to reinforce to potential buyers what a rare and costly asset the piece is. A $200M valuation tells that story… but it may not hold up when it’s time for a sales dream to become a sales reality, especially when there are immortal questions - and thus immortal risk - about its authorship.