All too often the business press falls prey to reductive explanations. For instance, during the debt ceiling crisis, every time the market fell it was reported that stocks were down “on shutdown, debt ceiling concerns” or “as debt ceiling nears”. It was literally impossible for the market to fall without the debt ceiling being blamed -- and of course there was no evidence at all to prove causation.
Steve Cohen’s art purchases similarly fall victim to this problem. Peter Lattman and Carol Vogel explained in Dealbook last week that Cohen is selling a number of works this November at the Sotheby’s contemporary art auction in New York, in addition to stocks, in order “to meet withdrawal requests from skittish investors”.
There are a number of problems with this analysis, starting with the fact that it cannot be confirmed that these are Cohen’s works in the first place (the sourcing is anonymous and Sotheby’s won’t confirm). Secondly, Cohen buys and sells work all the time. Last year, he reportedly took three minutes to make the decision to buy Picasso’s “Le Rêve” from Steve Wynn for $150 million. In 2009, Sotheby’s had a museum-quality show of the $450 million worth of Cohen art -- all in the single genre of women’s portraits. It’s fair to assume that most of the works were for sale, at the right price. Pick any modern or contemporary auction in the last five years and there is a decent chance that Steve Cohen was somehow involved.
Finally -- and most importantly -- if you need cash, selling your art (publicly, no less!) is the option of last resort. The auction isn’t until November. If his work sells, Cohen will be somewhere between $30 million and $60 million more liquid two months from now. For someone of Cohen’s net worth, that amount is negligible in relation to billions of dollars in investor withdrawal requests. And that’s if it does sell. It might not even sell, and it will instead sit on his wall for another five years before he can try again. If Cohen really was selling his work for the cash, he’d be selling it privately through Larry Gagosian, and we’d never know about it unless there was a nasty lawsuit over the details.
It’s really doubtful that in his $10 billion holdings, he doesn’t have a better way of scrounging up $50 million than selling a few Warhols and a Gerhard Richter. Besides, investor withdrawals pay for themselves: you just liquidate the investors’ holdings which never really belonged to you in the first place, and return them. A billion-dollar fine would be a different matter -- but even that will almost certainly be paid out of investments. Which won’t stop the financial press from declaring, every time that Cohen sells a piece, that he might need the cash to meet other obligations.