Dealers and collectors analyze the surprising news from Geneva
On March 25, Patek Philippe sent out a memorandum to its clients,[1] explaining that it is making changes to the way it issues Extracts from its Archives. As Patek explains on its website, it currently issues Extracts for watches older than five years:
An "Extract from our Archives" states the meticulously kept, up-to-date information registered in the Patek Philippe Archives since 1839. It can be ordered for any Patek Philippe timepiece older than five years. This service costs 150 Swiss Francs, or the equivalent amount in your local currency.
In addition to the type of watch, Extracts also include information like the movement and case number, type of dial, dates of manufacture and sale, and any other information — in other words, information that can be invaluable to clients and collectors in evaluating a watch’s provenance and originality.
Come April 1, this is all changing.
Starting then, only watches sold from 1989 and prior are eligible to receive an Extract from the Archives. Further, the price of the service will increase from CHF 150 to CHF 500 (promising a refund if the service is denied). Additionally, an Extract from the Archives can only be requested every five years.
The memo came as a surprise to many in the watch community, so what does it mean for the Patek Philippe market, both modern and vintage?
Making lemons out of lemonade
“Overall, it’s a negative for the entire market,” Eric Wind of Wind Vintage said. He explained that the move is rumored to be a reaction to a large collection of modern, grand complication Pateks showing up for consignment at a major auction house, all without a Certificate of Origin.
Wind started out by discussing the impact on the vintage Patek market, pointing out the obvious impact of a 300-plus percent price increase to obtain an Extract.
“If you have a $5,000 small, vintage Calatrava — which really is a large part of the market — are you really going to spend an extra $500-plus to get the Extract? It makes you think twice about these things.”
“And the fact you only can order one every 5 years makes it harder too. I’ve had clients misplace Extracts, but now suddenly if you don’t have it, it could mean the watch loses 10 to 20 percent of its value, or more. The ability to sell at the correct market value becomes much more difficult.”
He explained that having the Extract helps to solidify the title of a watch; if a Patek is sold naked (without papers), Wind (and other diligent dealers) worry it’s been stolen. Buying a watch with the Extract provides some extra security.
Meanwhile, Wind is also worried about the impact on the modern Patek market.
“On the modern side, it makes life a lot more difficult, both from a title perspective, and because it will depress the value of any modern Patek without the original Certificate of Origin.”
He explained a number of situations his clients have found themselves in, having honestly lost or misplaced the original Certificate for a Patek produced after 1989. Wind specifically told the story of one seller who hid his papers away so well to keep them safe in preparation for a major hurricane that he didn’t find the papers until years after he sold the watch when he moved houses. Potential buyers of these modern pieces expect that Certificate and many will be spooked away now that these pieces don’t have — and can’t get — it.
Wind says there’s no doubt the new policy is going to hurt the value of watches without Certificates.
Among collectors, many have the same worries that Mr. Wind expressed.
“It feels like a stab in the back to the collector of vintage Patek Philippe,” collector Roni Madhvani said of the announcement. “At the cost of being excommunicated, it’s totally dumb. When you have a great thing going, don’t let entitlement and arrogance ruin it.”
An Instagram post from John Nagayama expressed a similar sentiment. He pointed out how valuable Patek’s Extract service has been for the brand’s secondary market before concluding, “I’m very concerned that it may lead to a decline in Patek Philippe's brand power and market distribution volume in the future.”
A market for lemons
“There’s so much bad behavior that goes on in the world, especially in the world of grand complications,” Wind said. Rumors of dealers holding back a sold watch’s Extract and case back, demanding what essentially amounts to a ransom payment for these after invoicing and shipping the watch itself, are only the tip of the iceberg in illustrating both foul play and how valuable Extracts can be.
But the move by Patek opens up a whole new opportunity for bad behavior. Imagine a malicious dealer destroying the Certificate of a Patek from the 1990s or later that they have in hand, then proceeding to swap out the watch’s dial for something more rare or unique to make the watch more valuable. Now, any potential buyer is left wondering if a watch was born with that unique dial, or if it’s been messed with, unable to verify with an Extract. A similar scheme might be devised for a vintage Patek, requesting an Extract and then destroying it, leaving potential buyers unable to request another for five long years.
This is particularly the case with piece uniques or custom dials. Whereas an Extract might have been able to prove the originality of such a watch, that opportunity is now foreclosed for modern Pateks missing papers.
It’s a classic problem of adverse selection, creating a market for lemons in which buyers then have to assume that no papers means a watch has been tampered with by a seller. If you’re one of those sellers that honestly misplaced or lost your papers, you’re out of luck.
So will the move stick?
“I could see Patek reversing this situation in three to five years,” Wind said. “Going from being able to order an Extract for a watch only five years old to a watch having to be 31 years old is just such a huge jump.”
For now, though, dealers and collectors are left wondering and worried about the implications of the sudden announcement from Patek.
Further reading: As I hit send, I notice Collectability’s John Reardon has also offered his thoughts on the announcement in a blog post — his sentiments generally align with those quoted here (“I thought it was an April Fool’s joke,” he says). In addition to his expert perspective, he also provides a valuable history of Patek’s Extracts service.
[1] Full memo:
