The woes of Hipgnosis Songs Fund, which owns the streaming rights to artists ranging from Beyoncé to Neil Young, have deepened, as it delayed the publication of its half-year results at the last minute.
Hipgnosis said it was postponing its results because the company valuation by its independent valuer was “materially higher” than the valuation implied by proposed and recent transactions in the sector, in particular its recent sale of song rights at a steep discount.
The fund last week sold 20,000 “non-core” songs for $23.1m (£18.4m), at a 14% discount to their previous valuation.
Tuesday’s statement also referred to a proposed sale of assets for $417.5m at a 24% discount to their previous valuation, when Hipgnosis failed in its attempt to sell almost a fifth of its back catalogue to the private equity group Blackstone.
Blackstone had previously invested in Hipgnosis Song Management, the entity that decides on investments in the fund. Shareholders in the Hipgnosis fund voted against the deal in late October.
The board sought advice from Hipgnosis Song Management on its opinion on the independent valuer’s valuation.
“Hipgnosis Song Management 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,” the fund said. It expects to publish its results for the six months to 30 September by 31 December.
Higher interest rates have plunged the fund into turmoil, making the prospect of future income from streaming royalties less attractive to investors and forcing changes to how the fund calculates the value of future revenues.
The company cancelled dividend payments to shareholders in October, saying that changes to US royalties had reduced its income. It said paying a dividend would force it to breach its covenants – agreements with lenders.
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Hipgnosis was founded in 2018 by Merck Mercuriadis, who believed that online streaming had made the rights to long-lasting music hits an attractive investment proposition.
Mercuriadis previously managed artists including Elton John, Guns N’ Roses, Morrissey and Iron Maiden, and used his contacts to snap up the rights to song catalogues in a series of deals. He built up a portfolio of almost 61,000 songs worth $2.2bn.
