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Hipgnosis Songs Fund In Crisis: Investors Reject Catalog Sale And Demand Major Overhaul

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Hipgnosis Songs Fund, a company that led the music-catalog gold rush in recent years by investing over $2 billion in song assets from artists like Neil Young and the Red Hot Chili Peppers, is now facing an uncertain future. A significant 83.2% of its investors voted for a new board to implement major structural changes in the company during a recent meeting. This vote also marked the rejection of a proposal by the company’s leadership to sell approximately $440 million worth of its 65,000-song catalog to a sister fund supported by Blackstone.

 

The “no” vote came as no surprise, concluding months of increasing shareholder frustration. The troubled company, founded in 2018 by Merck Mercuriadis, saw its share price drop to less than half of its value from a year ago. Now, Mercuriadis faces the formidable task of devising a plan for the reconstruction, reorganization, or winding-up of the company. This plan could potentially involve liquidating some or all of the company’s existing portfolio of investments, according to a statement from the board as cited in Music Week.

The company’s board has been given six months to present proposals for the reorganization of the fund, which could range from a complete overhaul to the dissolution of the company. As a result of the vote, Hipgnosis’s chair, Andrew Sutch, who had already announced his retirement, will need to step down immediately, and the company’s non-executive directors, Paul Burger and Andrew Wilkinson, resigned before the vote.

The impact of these developments on the broader music-catalog economy remains uncertain. The industry has seen a cooling of interest as interest rates have risen and asking prices have reached unsustainable levels. Proposed deals involving major catalog assets from artists like Queen, Pink Floyd, and Michael Jackson have struggled in recent months.

Hipgnosis Songs Fund’s prospects took a hit when it reduced dividends for investors, owing to the U.S. Copyright Royalty Board’s decision last year to recalculate royalty payments. This adjustment prompted the influential U.K. music rights valuer, Citrin Cooperman, to lower Hipgnosis Songs Fund’s expected royalties from $21.7 million to just $9.9 million for tracks played between 2018 and 2022. This caused the company’s shares to drop more than 10% to 65p, less than half of their value a year prior.

Sylvia Coleman, senior independent director of Hipgnosis Songs Fund,

In a statement following the vote, Hipgnosis’s board announced that it would put forward proposals for the company’s reorganization, reorganization, or winding-up within the next six months, as per the company’s prospectus. These proposals may or may not involve liquidating all or part of the company’s existing portfolio of investments.

Sylvia Coleman, senior independent director of Hipgnosis Songs Fund, acknowledgedthat while shareholders did not support the proposed transaction or the continuation vote, they did express belief in the quality and potential of the company’s iconic song assets. The board is expediting the appointment of a new chair to drive the previously announced strategic review with a focus on delivering improved shareholder value.

that while shareholders did not support the proposed transaction or the continuation vote, they did express belief in the quality and potential of the company’s iconic song assets. The board is expediting the appointment of a new chair to drive the previously announced strategic review with a focus on delivering improved shareholder value.

Merck Mercuriadis, in a statement following the vote, emphasized the opportunity to reset and focus on the future. He recognized that shareholders are enthusiastic about the quality of the company’s iconic portfolio of songs but also demand change, which the company respects. Hipgnosis Song Management’s new management team has already taken necessary actions to meet shareholders’ expectations. Mercuriadis reaffirmed the company’s commitment to its shareholders and its dedication to managing the songs with the utmost care. He expressed gratitude to departing board members Andrew Sutch, Andrew Wilkinson, and Paul Burger for their contributions to the company over the years.

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