Damien Hirst: King of diamonds

After his glittering skull fetched 50m, Damien Hirst became the world's most expensive living artist. Now Andrew Johnson reveals the truth behind the mysterious sale

Controversy over Damien Hirst's diamond-encrusted skull, which reputedly sold for 50m, will reignite next month with the claim that the artist retained almost a quarter share or 12m in the work.

News that Hirst has held on to such a large chunk after he announced in August that the famous piece called For the Love of God had raised 50m will add fire to rumours rife in the art world that the skull, jewelled with 8,601 diamonds, was never, in fact, "sold".

Don Thompson, an economist, writes in his book The $12m Stuffed Shark that Hirst retained a 24 per cent stake. Until now it had not been revealed how much of a stake Hirst had kept. It is widely believed that the other members of the consortium that bought the work, which gave Hirst the status of most expensive living artist, include his close associates.

Thompson's book dissects the marketing of contemporary art, which has led to an unprecedented boom in prices for living artists such as Hirst. He questions how the value of work is driven up relentlessly by dealers and auction houses, noting that when Charles Saatchi, who commissioned the famous pickled shark for 50,000, came to sell it, an offer of $2m (1m) from the Tate Modern was turned down by the dealer Larry Gagosian, who instead managed to sell it to New York hedge fund billionaire Steve Cohen for $12m. The Tate has denied this.

When For the Love of God went on the market at the fabulous price of 50m, it generated headlines around the world and enhanced the value of other Hirst artworks. His Lullaby Spring cabinet of hand-painted pills sold for 9.6m at auction making Hirst, briefly, the most expensive living artist at auction just a few weeks after the skull first appeared. Failure to sell the skull after such publicity would have had a disastrous knock-on effect on the value of his work.

Shortly after The Art Newspaper reported that the highest offer for the work was 38m, Hirst announced the sale of For the Love of God to a consortium and that he had retained a stake in order to ensure a tour of museums. However, no details of the buyers were released and it was claimed that they had paid for the piece in cash.

"It hasn't technically sold," Cristina Ruiz, the editor of The Art Newspaper, said.

It has been suggested that the venues for the tour such as the Hermitage in St Petersburg are a shop-front to attract cash-rich Russian and Asian buyers.

Doubt has also been cast on the value of the diamonds. While Hirst has said they cost 12m, Richard Polsky, an art dealer and writer from San Francisco, said the cost of the diamonds could be as low as 5m.

"I believe Hirst when he said his contribution to owning part of the piece is supplying the diamonds," he said. "A friend of mine, in the diamond business, told me the 'break-up value' of the diamonds in the skull is less than $10m. So much of what Hirst does is calculated to get attention that's how the skull should be viewed."

David Lee, the editor of The Jackdaw magazine, said many prices were being supported because dealers were buying their own work. "The whole thing smells of people trying to manipulate the market and push up prices. It's not about art," he said. "The kind of antics in the art world wouldn't be tolerated in any other industry. It's all about keeping yourself visible and your profile high. The people who get themselves in the press and on TV are the ones who command the highest prices. It's got nothing to do with art."

Despite repeated predictions of imminent collapse, the contemporary art market is in such rude health that in February, Sotheby's will hold its first ever week devoted entirely to contemporary sales, at which Francis Bacon's Study of a Nude with Figure in a Mirror is expected to sell for up to 25m.

Damien Hirst's management company did not respond to requests for a comment.

Further reading 'The $12m Stuffed Shark' by Don Thompson will be published next month by Aurum Press (14.99)