Nov. 9 (Bloomberg) -- Shares of Sotheby's, the world's second-largest auction house, fell as much as 13 percent after the company lost $14.6 million on auction guarantees at its impressionist-art sale this week.

Sotheby's went into the fall auctions after getting board approval for $500 million of guarantees, or promises of fixed prices to sellers whether their art sold or not.

It was the second day of declines for the stock, which fell the most ever yesterday and lost as much as $4.77 today. The stock was at $33.19, down $2.65, at 10:01 a.m. in New York Stock Exchange composite trading.

``Our impressionist and modern art sales this week were profitable'' overall, Chief Executive Officer William Ruprecht said in a conference call. ``However, these results fell below our presale expectations.''

The announcement about the auction guarantees came as Sotheby's reported that its third-quarter loss shrank to $20.9 million, or 33 cents a share, from a net loss of $30.7 million, or 50 cents a share a year earlier, in a statement from its New York office distributed by PR Newswire.

Sotheby's impressionist sales this week took in $331 million with commissions, falling short of its low estimate of $420 million before fees.

Guaranteed Van Gogh

Of 26 lots guaranteed at its Nov. 7 impressionist sale, five didn't sell, including a Vincent van Gogh painting, and 10 sold below Sotheby's estimated range, according to analyst Kristine Koerber of JMP Securities.

Sotheby's carries bigger liabilities for its contemporary-art sale on Nov. 14, with about 78 percent of the low value guaranteed, according to Koerber of JMP Securities. Guarantees of at least $174 million have been granted for paintings including a Francis Bacon bullfight picture valued at as much as $35 million and an $18 million Mark Rothko, Koerber said.

The Nov. 7 sale's ``lackluster performance suggests that key fears related to subprime/credit/housing issues may be playing out in the U.S.,'' Banc of America analyst Dana Cohen wrote to clients yesterday.

The auction house was expected to report a loss of almost 37 cents a share, based on generally accepted accounting principles, according to the mean estimate of four analysts surveyed by Bloomberg.

Guarantees Included

The $14.6 million pretax loss on impressionist-art guarantees was included in third-quarter results because the commitments were taken on in that quarter, Sotheby's said.

Higher art sales and cost-cutting measures helped the third quarter, even as some collectors were losing money on subprime mortgage investments.

To cut costs in 2007, Sotheby's ended auctions at a West London outlet and trimmed Japanese sales at Bond Street.

Even in a boom, Sotheby's usually loses money in the third quarter, when it has few major sales and carries the cost of international expansion from the Middle East to Moscow. The first three months seldom make money either, though they did this year. In the past 20 years, Sotheby's had a profit only five times in the first or third quarters, according to company data.

``Increased revenues helped reduce the loss from last year,'' George Sutton, an analyst at Craig-Hallum Capital Group LLC of Minneapolis, said in an e-mail. ``The company has also been reducing some of its cost structure.''

Old-Master Sales

Sotheby's London old-master sales in July including Velazquez's ``Santa Rufina'' painting, took in 45.2 million pounds ($95.1 million) including commissions, compared with 31.8 million pounds in July 2006.

In the first six months, Sotheby's sold $2.87 billion of art at auctions, plus private transactions of $334 million. London- based Christie's sold 1.52 billion pounds of art and collectibles at auctions in the first half, and handled 82 million pounds of private transactions.

Sotheby's, with its main salerooms in New York, is incorporated in Wilmington, Delaware.

To contact the reporter on this story: Linda Sandler in London at lsandler@bloomberg.net.

Last Updated: November 9, 2007 10:03 EST