Hipgnosis
Page: 3
Merck Mercuriadis will step down as chief executive officer of catalog investment advisor Hipgnosis Song Management, the company announced on Friday (Feb. 2). The executive, who spent years managing the careers of artists like Elton John, Beyoncé and Guns N’ Roses before launching Hipgnosis, will transition to a newly created chairman role and will continue to “lead engagement” with industry stakeholders on behalf of the business, it said.
Explore
Explore
See latest videos, charts and news
See latest videos, charts and news
Taking on the CEO role will be Ben Katovsky, HSM’s president and chief operating officer since joining the company in October 2022. He boasts almost two decades of experience in the music industry, most recently in a seven-year tenure as chief operating officer at BMG.
“One of our most important goals has been to bring an institutional rigor to Hipgnosis Song Management,” Mercuriadis said. “Over the last 16 months, Ben has done an amazing job building the team and HSM’s capabilities to deliver the best possible service to our clients and I’m certain this appointment makes us stronger.”
Added Katovsky, “I am proud to be asked to lead HSM through its next chapter, building on all Merck has achieved. In my time in the music industry I haven’t come across anyone who can match his rapport and relationships with songwriters and artists.”
Hipgnosis Song Management is the investment advisor for Hipgnosis Songs Fund, the publicly-listed royalty fund with a catalog that includes stakes in songs by Neil Young, Justin Bieber, Journey, Lindsey Buckingham, Blondie, Justin Timberlake and many other artists and writers. HSF capped a turbulent 2023 by lowering the value of its catalog following what new board chair Robert Naylor described to investors as a strained relationship with the Mercuriadis-led HSM over the catalog’s value.
A third Hipgnosis, Hipgnosis Songs Capital, is a joint venture between HSF and investment giant Blackstone. It is wrapped in a proposal to acquire 29 catalogs for $440 million to help the public fund reduce its debt and improve its share price.
In January, the public fund’s board of directors leveled several complaints against its namesake advisor, calling into question its ability to field competitive bids for its trove of assets. A main sticking point is the investment advisor’s call option — a right to purchase the company’s catalogs if its contract is terminated with less than 12 months’ notice, among other scenarios — which the board contends harms the fund’s ability to receive competitive bids.
The fund’s board wants to make the bidding process more attractive and on Jan. 18 announced a proposal to pay bidders a 20-million-pound ($25.4 million) fee to cover due diligence and acquisition costs when they pursue a purchase of HSFs assets. Shareholders will vote Feb. 7 on that proposal.
HSM said in its announcement that it has sought approval from the fund for the management transition.
In further comment, Katovsky praised HSM’s two clients — HSF and HSC — for their “vision, ambition and on-going commitment to grow music as an asset class through HSM,” and said he hoped to collaborate well with the fund’s board going forward.
“I particularly hope we will be able to work constructively with the Board of Hipgnosis Songs Fund Ltd, as I believe that HSM is best able to deliver value for their shareholders whether they decide the Company has a future as a long-term operation or wish to pursue the sale of assets following their strategic review,” he said.
Added Mercuriadis, “Having invested almost $3 billion on behalf of our clients in extraordinarily successful songs we are at an important juncture in our development where the services we provide to our clients are of paramount importance. Our commitment remains stronger than ever. We look forward to continuing our work with songwriters and the creative community to create the greatest possible opportunities from the iconic and culturally important Songs which we manage on behalf of HSM’s clients.”
Hipgnosis Songs Fund capped off an eventful 2023 by lowering the value of its music catalog amidst internal conflict over exactly what the company’s star-studded catalog is worth.
Explore
See latest videos, charts and news
See latest videos, charts and news
The publicly listed royalty fund said its operative net asset value per share declined 9.2% to $1.74 on Sept. 30 from $1.92 on March 31, according to its half-year earnings report on Thursday (Dec. 21). The sharp decline stemmed primarily from a “material reduction” in expectations for CRB III and CRB IV income.
The company’s self-reported valuation has long exceeded the value implied by its share price and estimates of equity analysts. In recent months, Hipgnosis Songs Fund has proposed and completed partial catalog sales at discounts to their net asset values.
New board chair Robert Naylor‘s statement to investors described a strained relationship with the fund’s investment advisor, the Merck Mercuriadis-led Hipgnosis Song Management, over the valuation of the five-year-old company’s catalog that includes stakes in songs by Neil Young, Journey and Fleetwood Mac.
Two days earlier, the board postponed the release of half-year earnings after the investment advisor produced a “heavily caveated” opinion on the catalog valuation provided by independent firm Citrin Cooperman that was “materially higher than the valuation implied by proposed and recent transactions in the sector.”
Internal conflicts continued while the results were delayed. According to Naylor, the board’s request of Hipgnosis Song Management about “the matter to be published on the Company’s website in order to provide transparency for shareholders” was rebuffed “under the confidentiality clauses of the Investment Advisory Agreement.”
On Thursday, Naylor urged Hipgnosis Songs Management to provide an opinion on the valuation of Hipgnosis Songs Fund “without caveats” to provide greater transparency to shareholders. In the absence of a caveat-free opinion, the board urged investors to use “a higher degree of caution and less certainty” than normal when considering its fair value and operative NAV.
Hipgnosis Songs Fund shares fell 1% to 0.70 GBP on Thursday.
Gross revenue from continuing operations declined 26.9% to $63.2 million from $86.4 million in the six-month period ended March 31, 2023.
Net revenue from continuing operations declined 29.7% to $54 million from $76.8 million. About half of the decline came from a $11.9 million reversal of accrued royalties in October. Excluding those accrued revenues, net revenue grew 14% to $65.8 million.
Pro-forma annual revenue (PFAR), which measures gross royalties received and excludes revenue accruals, grew 10.4% to $64.9 million.
Following shareholders’ vote against continuation at the annual general meeting on Oct. 26, Hipgnosis Songs Fund transformed its board of directors by naming Naylor to succeed Andrew Sutch as chairman and adding Francis Keeling, a former Universal Music Group executive, and Christopher Mills, CEO and investment manager at North Atlantic Smaller Companies Investment Trust, to replace Andrew Wilkinson and Paul Burger, both of whom left prior to the annual general meeting.
The new board undertook a strategic review and named Shot Tower Capital as lead advisor to conduct due diligence on the catalog. On Thursday, Naylor said he was pleased with the strategic review’s progress thus far. “This process will help the new Board bring forward proposals for delivering value to shareholders,” said Naylor.
But Naylor also described “ongoing failures in the financial reporting and control process” since he joined the board. “Whilst we consider substantial progress has been made in identifying and rectifying these issues,” Naylor added, “we have had to suspend the dividend for at least the remainder of the year in order to ensure compliance with our banking covenants.”
Just one day after announcing a delay in publishing interim financial results for the six months ended Sept. 30, Hipgnosis Songs Fund has announced the appointment of a new auditor.
In a press release on Wednesday (Dec. 20), the Merck Mercuriadis-led company said it had appointed KPMG Channel Islands Limited as its new auditor, “with immediate effect for the financial year ended” Mar. 31, 2024. KPMG succeeds PricewaterhouseCoopers (PwC) in the role.
The release notes that the appointment of KPMG will be subject to approval by the company’s shareholders at a general meeting “to be convened in due course.”
“The previous auditor, PwC CI, has deposited with the Company a statement confirming that there are no matters to be brought to the attention of the Company’s members or creditors,” the release adds.
On Tuesday, Hipgnosis Songs Fund said it would delay publishing its financial results over concerns about its valuation, explaining that the valuation it received from an independent firm was “materially higher than the valuation implied by proposed and recent transactions in the sector.” These transactions include the proposed $417.5 million sale of 29 catalogs to Blackstone-backed Hipgnosis Songs Capital — a price reflecting a 24.3% discount from a valuation dated March 31 — and last week’s sale of 20,000 “non-core songs” to an undisclosed buyer for $23.1 million, which the company said reflects a 14.2% discount on the songs’ valuation as of early fall.
Hipgnosis Songs Fund now expects to announce its financial results on New Year’s Eve, according to the regulatory filing.
Hipgnosis is composed of three companies: Hipgnosis Song Management, Hipgnosis Songs Capital and Hipgnosis Songs Fund, the latter of which has been the subject of controversy for months. On Oct. 16, the London-listed trust revealed that it would not pay its investors a dividend due to new, lower revenue projections. On Oct. 26, more than 80% of the fund’s investors demanded structural changes to the music rights company, voting in favor of the board drawing up “proposals for the reconstruction, reorganization or winding-up of the company to shareholders for their approval within six months.”
Last month, it was also announced that the fund will not declare dividends before the fiscal year, which begins in April, to ensure it has enough on its ledger to pay contractually mandated catalog bonuses.
Hipgnosis Songs Fund owns full or partial rights to the song catalogs of artists including Justin Bieber, Neil Young, Bruno Mars, Jimmy Iovine, 50 Cent, Shakira, Blondie, Justin Timberlake and Lindsey Buckingham.
Hipgnosis Songs Fund ended the day up 1.43% on the London Stock Exchange following the announcement of the new auditor.
Hipgnosis Songs Fund has announced a last-second delay in publishing interim results for the six months ended Sept. 30, citing concerns over its valuation following a series of hiccups for the Merck Mercuriadis-led company.
The fund, which owns full or partial rights to the song catalogs of artists ranging from Justin Bieber, Neil Young, Bruno Mars, Jimmy Iovine, 50 Cent, Shakira, Blondie, Justin Timberlake, Lindsey Buckingham and many more, was scheduled to publish it financial results on Tuesday (Dec. 19) but now expects to announce on New Year’s Eve, according to a regulatory filing.
In explaining the delay, the Hipgnosis board said the valuation it received from an independent firm was “materially higher than the valuation implied by proposed and recent transactions in the sector,” namely two deals involving itself: a proposed $417.5 million sale of 29 catalogs to Blackstone-backed Hipgnosis Songs Capital, a price reflecting a 24.3% discount from a valuation dated March 31, and last week’s sale of 20,000 “non-core songs” to an undisclosed buyer for $23.1 million, which it said reflects a 14.2% discount on the songs’ valuation as of early fall.
Due to the disparity between the independent valuation and the “implied” one tied to recent trends and proposed sales, the board sought advice from its in-house investment advisor, Hipgnosis Song Management Limited, which delivered a “heavily caveated” opinion that led to the board’s concerns as to the valuation of HSF listed in the interim results scheduled to be disclosed today.
Hipgnosis is comprised of three companies: Hipgnosis Song Management, Hipgnosis Songs Capital and Hipgnosis Songs Fund. The latter of the three has been mired in controversy in recent months after it was announced that the London-listed trust would not pay its investors a dividend because of new, lower projections for revenue. On Oct. 26, investors of the fund overwhelmingly demanded structural changes to the music rights company, with more than 80% of Hipgnosis investors voting in favor of the board drawing up “proposals for the reconstruction, reorganization or winding-up of the company to shareholders for their approval within six months.”
Last month the company announced that the fund will not declare dividends before the new fiscal year, which begins next April, in order to ensure it has enough on its balance sheet to pay contractually-mandated catalog bonuses.
Investors are still processing the news, with the company’s stock only slightly down, roughly 2%, in mid-day trading on the London Stock Exchange.
Hipgnosis Songs Fund has found a buyer for a batch of “non-core songs” that have been up for sale since earlier this fall. In a filing Monday with the London Stock Exchange, where it is listed, HSF announced the sale of 20,000 tracks for $23.1 million, which it said reflects a 14.2% discount on the songs’ valuation as of late September.
The company said the sale of the songs, acquired in 2020 from Kobalt, is expected to net $22.6 million, which will be used to pay down a revolving credit facility and provide “greater headroom under its future covenant compliance reporting.” The buyer or buyers were not disclosed. The sale price represents a multiple of 9.6x net publisher share, according to a statement, and makes up approximately 1% of HSF’s investment portfolio value.
The specifics of these “non-core” songs have also not been disclosed. When the proposed sale was announced in September, the company’s board said the songs “require ongoing accounting and reporting obligations that take up significant bandwidth which can be better focused on active song management.”
Hipgnosis is comprised of three companies: Hipgnosis Song Management, Hipgnosis Songs Capital and Hipgnosis Songs Fund. The latter of the three has been mired in controversy in recent months after it was announced that the London-listed trust would not pay its investors a dividend because of new, lower projections for revenue.
On Oct. 26, investors of the fund overwhelmingly demanded structural changes to the music rights company, with more than 80% of Hipgnosis investors voting in favor of the board drawing up “proposals for the reconstruction, reorganization or winding-up of the company to shareholders for their approval within six months.”
Last month the company announced that the fund will not declare dividends before the new fiscal year, which begins next April, in order to ensure it has enough on its balance sheet to pay contractually-mandated catalog bonuses.
In its latest filing announcing the sale of unspecified songs, HSF also said it had appointed Singer Capital Markets as sole corporate broker and financial adviser, and Shot Tower Capital as lead adviser of the company’s strategic review.
Sony Music Publishing ruled the Top Radio Airplay, Hot 100 Songs and Country Airplay publisher rankings for its third consecutive quarter of 2023, and Warner Chappell Music surged to No. 2 on the Hot 100 Songs chart — the first time it has held the position since the Hot 100 ranking began in 2019.
For the period spanning July through September, all of the big three publishers benefited from shares in the Afrobeats radio hit “Calm Down” by Rema and Selena Gomez. Sony also benefited from stakes in “Last Night” by Morgan Wallen, which hit No. 5 on the Top Radio Airplay chart, and Taylor Swift’s surprise hit “Cruel Summer,” which reached No. 3 on the quarter’s Hot 100 Songs ranking, four years after its initial release due to its placement as the opening song of Swift’s The Eras Tour.
Last quarter, Tracy Chapman’s Purple Rabbit Music publishing company broke into the Hot 100 and Top Radio Airplay charts (ranking No. 7 and No. 10, respectively) for the first time, thanks to Luke Combs’ cover of her 1988 song “Fast Car.” This quarter, her market share as a publisher/songwriter grew even higher. Chapman finished the quarter as the top songwriter on all three charts, propelling Purple Rabbit Music to No. 5 on Top Radio Airplay and No. 6 on both Hot 100 Songs and Country Airplay.
But she wasn’t the only self-published songwriter to make the charts this quarter. As the sole writer of “Rich Men North of Richmond,” Oliver Anthony Music’s publishing company, Christopher Anthony Lunsford Pub Designee, placed at No. 8 on Hot 100 Songs with a 1.49% market share, surpassing such top 10 perennials as Downtown and Reservoir. Like Chapman, Anthony is the sole songwriter of his breakthrough song.
This is the first time that two independent songwriters have broken into the Hot 100 Songs chart at the same time.
Warner Chappell rose to No. 2 on the Hot 100 ranking for the first time in 19 quarters. Previously, it often ranked third or fourth. “Last Night” by Morgan Wallen, “Calm Down” by Rema and Selena Gomez, and 49 other Hot 100 Songs hits accounted for its strong showing of 18.18% of the market share. The publisher held steady in third place on the Top Radio Airplay chart with 15.87% of the market share, and ranked second on the Country Airplay chart with a 26.2% share.
Universal Music Publishing Group took second place on Top Radio Airplay — where its song placements increased to 52 from 49 in the second quarter — and third on Hot 100 Songs. Combs’ “Love You Anyway,” No. 3 on Country Airplay; “Cruel Summer”; and “Calm Down” were UMPG’s highest-ranked songs.
Kobalt held fast to No. 4 on both Top Radio Airplay and Hot 100 Songs but slid to No. 5 on Country Airplay behind BMG. The latter publisher’s share in Jelly Roll’s “Need a Favor” helped it edge past Kobalt’s 4.59% market share with 4.93%.
BMG and Big Machine Music both climbed in the ranks on the Country Airplay charts this quarter. BMG rose from fifth to fourth ranking, thanks to its share of 12 songs on the chart this quarter, including Jelly Roll’s “Need a Favor.” BMM climbed from eighth last quarter (2.57%) to seventh this quarter (2.97%), thanks in part to Luke Bryan’s “But I Got a Beer In My Hand.”
Concord finished 10th on Top Radio Airplay with 1.37%. That percentage might rise in the fourth quarter due to its acquisitions of Round Hill Music and Mojo Music & Media in September. If Concord’s third-quarter market share was combined with those of Round Hill and Pulse, which Concord also owns but lists separately, it would have finished at No. 5 on Top Radio Airplay with 4.96% and at No. 7 on Hot 100 Songs with 3.1%.
Rounding out the top 10, Reservoir fell to No. 8 on Top Radio Airplay with 1.82%, though it improved on its No. 7-ranked second-quarter share of 1.62%. It rounded out the Hot 100 Songs top 10 with 1.17%. Hipgnosis (1.76%) and Downtown (1.44%) finished at No. 9 on Top Radio Airplay and Hot 100 Songs, respectively.
Additional reporting by Ed Christman.
Hipgnosis Song Management (HSM) has announced that Daniel Pounder will become the company’s next chief financial officer, replacing Chris Helm by the end of this year. HSM has also created a new position of general counsel, tapping Jonathan Baker for the job. Both join from BMG.
The news arrives after a number of personnel changes to the company in recent weeks, including Hipgnosis Songs Fund board chair, Andrew Sutch, and two other board members who either resigned or failed to win re-election to their seats.
Hipgnosis — which owns rights to songs by Journey, Bruno Mars, Justin Bieber, Rihanna, and many more — is comprised of three branches: Hipgnosis Song Management, Hipgnosis Songs Capital and Hipgnosis Songs Fund. The latter of the three has been mired in controversy in recent weeks after it was announced that the London-listed trust would not pay its investors a dividend because of new, lower projections for revenue.
During a shareholder continuation vote on Oct. 26, where investors were asked to vote on whether they wanted to keep the investment trust going or liquidate the fund, selling $440 million worth of catalogs to the private side of the company — Hipgnosis Songs Capital — which is backed by Blackstone, more than 80% of investors voted in favor of the board drawing up “proposals for the reconstruction, reorganization or winding-up of the company to shareholders for their approval within six months,” the board said in a regulatory filing. “These proposals may or may not involve … liquidating all or part of the company’s existing portfolio of investments.”
In his role as CFO, Pounder will oversee the finances and investment functions of all three. He has over two decades of experience in music finance and accounting, including senior roles at BMG, Viacom, Famous Music and Sony Music Publishing. He completed his accountancy training with Deloitte and was admitted into the Institute of Chartered Accountants in England and Wales in 2003. By 2013, he was admitted as a fellow.
Current CFO, Chris Helm, will pass the responsibilities to Pounder over the next month and a half. According to a press release, the two will be “working closely” together to do a complete hand over until then. Helm will then be leaving to “launch a new business of his own early next year.”
Baker will oversee the legal affairs of the company’s catalog acquisition and day-to-day legal and business affairs for Hipgnosis. He will coordinate with the company’s outside counsel, including Bill Leibowitz, and will hold the responsibility for governance and compliance matters for the company and the fund’s clients.
Previous to this, Baker has 20 years of legal experience. He joins from BMG, where he has been general counsel in the U.K. and evp legal and business affairs international since 2012. Prior to that role, he worked at Simkins, a media and entertainment law firm.
Merck Mercuriadis, CEO and founder of Hipgnosis Song Management, says of the appointments: “It is always a priority for me to continually strengthen our executive leadership team to ensure we have the best institutional investment, finance and music capabilities and experience to deliver the next stage of development for Hipgnosis and our funds. This was the case starting with the appointment of Ben Katovsky as president and Chief Operating Officer one year ago and we’re delighted to welcome Dan and Jon to round out this process, particularly as this group of leaders have a proven successful chemistry of working together.
He adds, “Dan’s extensive experience and expertise in global music finance, ability to leverage data and technology and proven track record in supporting and enabling growing businesses will be of significant value to HSM and our fund clients as we work to further institutionalize the reporting and rigor of the song asset class. Likewise, Jon’s experience and expertise in global music legal affairs will support our funds while allowing us to prioritize responsible governane and compliance for Hipgnosis.”
Hipgnosis Songs Fund announced on Tuesday the appointment of Rob Naylor as board chair, replacing Andrew Sutch, who was removed as part of changes set in motion at last month’s shareholders meeting.
Naylor had been a top candidate, as Billboard sources indicated, and arrives at HSF following a tenure as board chair at Round Hill Music Royalty Fund, the public fund of Round Hill, which was recently sold to Concord as part of a $469 million sale. He is CEO of Intuitive Investments Group, a fund that invests in high growth life sciences companies, and held previous roles at JP Morgan Asset Management Limited, Panmure Gordon Limited and others.
Joining the board as a non-executive director is Francis Keeling, who held the same title at Round Hill Music Royalty Fund Limited until its recent sale. Keeling is currently executive vp of business development at Orfium, a rights management solutions company. A music industry veteran, he was previously global head of licensing at Spotify and before that, global head of digital business at Universal Music Group.
“On behalf of the Board, we are delighted that Robert and Francis have agreed to join Hipgnosis Songs Fund,” said Sylvia Coleman, senior independent director of HSF. “Robert and Francis’s appointments follow extensive engagement with shareholders, and their experience and knowledge working with investment companies, most notably at Round Hill Music Fund, will be invaluable to Hipgnosis as we look ahead to the next chapter.”
On Oct. 26, investors of the fund overwhelmingly demanded structural changes to the troubled music rights company — but in ways that don’t include selling off part of its 65,000-song catalog. More than 80% of Hipgnosis investors voted in favor of the board drawing up “proposals for the reconstruction, reorganization or winding-up of the company to shareholders for their approval within six months,” the board said in a regulatory filing.
Investors also voted 71.5% against the re-election of Sutch, then-board chair, speeding up his departure, which was already set for 2024. Fund directors Andrew Wilkinson and Paul Burger also resigned as part of strategic review of its leadership.
In emailed comment following the shareholders meeting, founder Merck Mercuriadis framed the vote as “an opportunity to reset and focus on the future.”
Investors want serious, swift changes to make Hipgnosis Songs Fund more profitable and stable. That was the key takeaway from more than 80% of investors’ votes last week on how the London-listed trust that owns rights to songs by Journey, Bruno Mars and Rihanna should proceed. While the landslide vote opened the door to possibly winding up the pioneering publicly traded music royalty trust, it doesn’t spell an immediate end — more like the long beginning of company-wide rethink to improve the company’s stock price.
More than 80% of Hipgnosis investors voted in favor of the board drawing up “proposals for the reconstruction, reorganization or winding-up of the company to shareholders for their approval within six months,” the board said in a regulatory filing.
“These proposals may or may not involve … liquidating all or part of the company’s existing portfolio of investments.” Adding further uncertainty to the fund’s future is that, while its board devises a plan to restore regular dividends and boost a lagging share price, it must simultaneously find replacements for its chair, Andrew Sutch, and two other members, after those three either resigned or failed to win re-election to the board seats last week.
Sources say Round Hill Music Royalty Fund’s outgoing board chair, Rob Naylor, is being considered to chair of Hipgnosis Songs Fund’s board. Naylor is a former London banker and currently the chief executive officer of Intuitive Investments Group, a fund that invests in high growth life sciences companies. Naylor would have been closely involved in negotiating Round Hill’s $469 million sale of its public fund to Concord, which shareholders approved in mid-October and closed this week.
Jefferies analyst Matthew Hose says one route the board might take would be similar to Round Hill’s sale — Hipgnosis Songs Fund could sell itself to its sister fund Hipgnosis Songs Capital, which is jointly run by Mercuriadis’ investment advisor Hipgnosis Song Management and private equity goliath Blackstone, or it could sell itself just to Mercuriadis’ investment advisor Hipgnosis Song Management.
Although investors soured on an earlier plan to sell about 20% of the Hipgnosis Songs Fund to Hipgnosis Songs Capital, with Blackstone’s backing it remains among the most capable buyers and it knows the portfolio of songs well, analysts agree. There’s also a clause in the investment advisory group’s contract that says if the public fund ends its contract with investment advisor, the investment advisor can buy out the fund. The clause, which was laid out in the fund’s 2018 filings when it went public, was intended to help Mercuriadis reassure artists whose catalogs Hipgnosis acquired that he would always stay on as the relationship manager in charge of their songs and legacy.
While Hose says a sale to Mercuriadis and the investment manager could benefit all parties, “the question is whether this board is able to propose an ‘open’ sale process for the portfolio that extracts this fair value for shareholders, while still honoring the manager’s option, or will the existence of the option simply prohibit any realistic bids?”
Analysts who cover investment trusts like Hipgnosis Songs Fund say that about 80% of the time following a no continuation vote, a fund winds up, either through selling its assets to multiple buyers or all of the portfolio to a single buyer and then distributing those proceeds to shareholders minus any debt repayments.
The deliberation over which direction to take the fund will also rely on an updated valuation of the portfolio, which Hose says will likely see a downgrade since the disclosure in October that the fund’s valuers had inaccurately estimated certain CRB III royalty funds.
“We see the potential for weakness in the portfolio,” Hose says. “An independent valuation of the portfolio by a new valuer that gains the trust of the market … could be crucial here.”
Investors in Hipgnosis Songs Fund on Thursday overwhelmingly demanded a new board make structural changes to the troubled music rights company in ways that don’t include selling off part of its 65,000-song catalog, which includes compositions by Neil Young, Shakira and the Red Hot Chili Peppers.
At the company’s annual meeting of shareholders in London, a majority of investors voted no on a resolution “to continue running the fund in its current form”–what’s known as a continuation vote — and they rejected a plan to sell a package of 29 song catalogs to Hipgnosis’ Blackstone-backed sister fund, according to the fund.
The ‘no’ vote signals unequivocal shareholder anger with the company founded by Merck Mercuriadis, and it kicks off a 6-month countdown for the board to come up with a plan “for the reconstruction, reorganisation, or winding-up of the company,” possibly “liquidating all or part of the company’s existing porfolio of investments,” according to the board’s statement.
“While shareholders have not supported our proposed transaction or the continuation vote, it is clear that they share our belief in the inherent quality and potential of these assets,” Sylvia Coleman, senior independent director of Hipgnosis Songs Fund said in an emailed statement. “Directors are now expediting the appointment of a new chair who will drive the strategic review we have already announced, with a clear focus on delivering improved shareholder value.”
Investors voted against the re-election of Hipgnosis Songs Fund board Chair Andrew Sutch at the meeting, speeding up the timetable for his departure. Sutch had already announced he would step down before the company’s next annual general meeting in 2024. On Wednesday, the day before the company’s annual meeting, fund directors Andrew Wilkinson and Paul Burger resigned, and last week, the board embarked on a strategic review into the company’s management team.
“Shareholders have spoken and sent a clear message that the status quo is unacceptable and that a total reset is required,” Tom Treanor, the head of research at Asset Value Investors, which owns a roughly 5% stake in the fund, said in an email. “We look forward to a refreshed board working closely with shareholders to turn the company around.”
Mercuriadis, the former manager of Elton John and Guns N’ Roses, will continue as Hipgnosis Songs Fund’s investment advisor. Mercuriadis founded Hipgnosis in 2017 and took it public on the London Stock Exchange (LSE) in July 2018.
Hipgnosis Songs Fund’s share price rose 1.2% to 75.90 British pence ($0.92) at 11:20 in London.