Founder: Hipgnosis was co-founded by former music manager Merck Mercuriadis
Hipgnosis Songs Fund has delayed the publication of its half-year results amid doubts over the true valu eof its assets.
The troubled investment trust, which owns the back catalogues of musicians such as Blondie, Neil Young and The Kaiser Chiefs, was due to reveal its financial results on Tuesday.
But it told investors on Tuesday that an independent valuer had given the company a ‘materially higher’ valuation than one implied by two recent transactions involving the disposal of music rights.
Last week, Hipgnosis completed the disposal of about 20,000 songs for $23.1million (£18.4million) at a 14.2 per cent discount to their valuation at the end of September.
The firm further referenced the proposed sale of $417.5million worth of assets to Hipgnosis Songs Fund, backed by alternative asset manager Blackstone, at a 24.3 per cent discount to their worth in March.
Shareholders voted down the deal at an extraordinary general meeting on 26 October, where they also decided against giving the group a five-year mandate to operate as an investment trust.
Hipgnosis subsequently asked its investment adviser for advice on the independent valuer’s judgement.
‘Hipgnosis Song Management Limited eventually provided an opinion, which was heavily caveated, such that the board has concerns as to the valuation of the company’s assets in its interim results,’ it said.
The FTSE 250 business, headquartered in London but registered in Guernsey, now expects to publish its half-year results by New Year’s Eve.
The delay comes as doubts surround the survival of the company, whose market capitalisation has more than halved since April last year.
Hipgnosis has accumulated considerable debts from spending over $2billion acquiring the back catalogues of some of the world’s most popular musicians, such as Shakira, Justin Timberlake, and the Red Hot Chili Peppers.
Interest rate hikes have also weakened the appeal of music royalties relative to other asset classes like government bonds.
In mid-October, Hipgnosis told investors they would not receive a dividend for at least six months due to the pressure it would have placed on debt covenants.
The following month, co-founder Merck Mercuriadis was served legal proceedings accusing him of ‘a diversion of business opportunity’ from Hipgnosis Music Limited, a firm he previously owned, to the Hipgnosis Songs Fund. Mercuriadis has denied the claims.
The Canadian started Hipgnosis with Chic guitarist Nile Rodgers in 2018 after a long career managing musicians ranging from Sir Elton John to Morrissey, Iron Maiden and Guns N’ Roses.
Hipgnosis Songs Fund shares were 2.2 per cent lower at 67.6p on early Tuesday afternoon and have slumped by about 22 per cent since the year started.
