Hipgnosis Songs Fund has been hit by a deeper crisis as it faces legal action from a business its founder Merck Mercuriadis once ran.
Acting on behalf of creditors, liquidators of Hipgnosis Music Limited have filed a claim in the High Court alleging ‘a diversion of business opportunity’ from HML, of which Mercuriadis was previously a director, to the Hipgnosis Songs Fund.
They also allege that Hipgnosis Songs Fund ‘unlawfully assisted Mercuriadis with, or received, this alleged diversion’.
Sour note: Hipgnosis Songs Fund faces legal action from a business its founder Merck Mercuriadis (pictured) once ran
Mercuriadis, 60, was a director of HML until it was wound up in 2018. Later that year he launched Hipgnosis Songs Fund, which owns songs of artists including Shakira, with Chic guitarist Nile Rodgers.
Mercuriadis and Hipgnosis Songs Fund deny the claims and plan to ‘vigorously defend them’, although it also revealed it is not insured for the costs of dealing with this claim.
Hipgnosis is undertaking a strategic review after shareholders in October voted against its structure and plans to sell parts of its music catalogues, prompting a reorganisation or wind-up within six months.
The shareholders voted to oust chairman Andrew Sutch, who will be replaced by Robert Naylor, who impressed investors with his work at rival Round Hill Music, which was sold to Concord in September in a £375million deal.
Hipgnosis is appointing independent advisers to conduct due diligence on its assets. And it is also on the lookout for a new auditor after PwC, auditor since 2018, decided to throw in the towel.
PwC declined to comment on its reasons.
Hipgnosis owns the rights to 65,000 songs and made its name by securing the music of some of the world’s biggest acts, from Kaiser Chiefs to Blondie.
But investors are disgruntled by returns, especially as Mercuriadis’s life continues to appear lavish across social media, and the firm has scrapped its dividend.
Hipgnosis shares fell 1.9 per cent, or 1.4p to 71.5p.
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