This article explains what happens to watchers of a listing when the listing is relisted by the seller. Relists are only available for apps, domains and starter sites. For more information on established site auctions please see here.
When a seller re-lists a classified listing after it has ended as an auction listing, the watchers of the original listing will not carry over to the new listing. However, if the watchers of that listing also watch the seller, they will be notified that the seller has posted a new listing instead.
Alternatively, if a seller re-lists an auction listing as a new auction listing, the watchers do carry over to the new listing in this case.