The baffling dance around the future of Hipgnosis Songs Fund took another turn on Thursday, as the company reported a drop in the value of its assets after a two-day delay. The company’s operative net assets value per share were at $1.7392 as of Sept. 30, down 9.2% from the end of March, according to Reuters, Financial Times and other media reports.
The confusing turn of events reflects a battle between two Hipgnosis entities, the board of the Songs Fund and its investment adviser, Hipgnosis Song Management. In announcing the numbers, the Fund’s board said its asset value should be viewed “with a higher degree of caution and less certainty than might otherwise be attached to it as an accurate reflection of the fair value of the company’s assets.” It said Hipgnosis Song Management had provided a “heavily caveated” opinion of the valuation.
In a statement to PvNew on Thursday, Hipgnosis Song Management said: “Further to the statement of Hipgnosis Songs Fund (the “Company”) earlier this morning, Hipgnosis Song Management has fulfilled its duties to the Company with respect to both the independent valuation and preparation of the interim results in a timely and efficient manner. Notwithstanding the decision of the Company’s Board to delay publication of the interim financial statements, the Investment Adviser will continue to work in a constructive manner to support the interests of the Company and its shareholders.”
An analysis by Music Business Worldwide put a sunnier spin on the results, saying they “actually reflect a strong underlying performance from the firm’s catalog,” noting that its “like-for-like net revenue grew by14.0% year over year to$65.8 million, up from$57.6 millionin the equivalent prior-year period.” However, it notes, this calculation omits any impact fromthe U.S. Copyright Royalty Board’sdecision to raise royalty ratesfor music publishers in the U.S. across the years 2018-2022, which clobbered the Fund’s revenue and caused the cancellation of dividend payments to its investors in October.
The company’s stock price has lost half of its value over the past year as the music catalog market has cooled off due largely to higher interest rates; the fund, whoseinvestors voted in October for a full reorganization of its board, has worked to sell off certain catalogs to boost its value, although a proposed $417.5 million sale of 29 catalogs to Blackstone-backed Hipgnosis Songs Capital was rejected by the board in October; the board also ousted its chairman, forcing new management to put forward proposals within six months or face a potential wind-up, or compulsory liquidation.
Founded in 2017 by former Elton John and Guns N’ Roses manager Merck Mercuriadis, led the charge on the music catalog gold rush of recent years but became overextended in recent months.
Last week, the fund sold 20,000 “non-core” songs for $23.1 million, at a 14% discount.
Tuesday’s statement also referred to a proposed sale of assets for $417.5 million at a 24% discount from a previous valuation, when Hipgnosis was unsuccessful in its attempt to sell nearly a fifth of its back catalog to the private equity group Blackstone. That company had previouslyinvested in Hipgnosis Song Management.
The fund’s value has been ravaged by higher interest rates, which has gouged the prospects of future income from streaming royalties. The companycancelled its dividend payments to shareholdersin October, saying that changes to U.S. royalties had reduced its income.
