Sotheby's Loses $28.2 Million on Contemporary Art Guarantees

As a result of certain guaranteed property that failed to sell in these Contemporary Art auctions, the Company will own inventory currently valued at approximately $16 million, which had original presale low and high estimates of $24.1 million and $32.7 million, respectively.

As of Nov. 14, 2008, subsequent to the Contemporary Art sales discussed above, the Company has outstanding auction guarantees totaling $13.5 million, the property relating to which has pre-sale low and high estimates of $14.7 million and $19.4 million, respectively. The property related to such auction guarantees is being offered at auctions in December 2008 and the first half of 2009.

In light of the current uncertainty in the global economy and volatility in the financial markets, the Company expects to continue to substantially reduce its use of auction guarantees until stability is restored in the global economy and financial markets.

If the market heads south, the bull market-driven presale estimates and the financial risks of loans and guarantees suddenly become very dangerous. We've seen this happen before. It's always tempting to believe that the good times will roll forever. That belief has always proven wrong.

The auction-house experts had better have their ears to the ground and their hands ready to pull the emergency brake.