Amid ongoing investor dissatisfaction stemming from the proposed selloff of 29 catalogs, a record-low inventory value, and extra, Hipgnosis Songs Fund (LON: SONG) has formally launched a “strategic overview.”
Hipgnosis revealed stated strategic overview right now, on the heels of “intensive engagement” with shareholders and forward of two high-profile investor votes scheduled for subsequent week. The primary of those votes issues the proposed $440 million sale of the aforementioned 29 catalogs, together with pursuits within the work of Barry Manilow, L.A. Reid, Fraser T. Smith, Nelly, and a lot of others.
If accredited, the deal would see the carefully related Hipgnosis Songs Capital assume possession of the IP at hand. In line with HSF execs, proceeds can be used to purchase again shares and to pay down a few of their enterprise’s long-maxed-out credit score line.
However crucial statements from key HSF traders in addition to unenthusiastic feedback from in-the-know nameless sources recommend that the transaction would possibly fail to obtain approval for a lot of causes. The second vote, for its half, will decide the way forward for HSF, referring particularly as to whether it must be given the inexperienced mild to maintain on working till at the very least January of 2026.
Whereas traders appeared poised to vote in favor of HSF’s continuation – the Fund has additionally teed up a number of govt pivots – Hipgnosis inventory earlier this week plummeted to a report low following the abrupt cancellation of a beforehand introduced dividend. After all, logic means that the developments have introduced a heavy dose of uncertainty with regard to the continuation vote.
Enter the above-highlighted strategic overview, which Hipgnosis Songs Fund says “will have a look at all choices to be thought of for the long run” of the enterprise and try to maximise “worth for shareholders” with “a overview of the long run administration preparations” and extra.
Although HSF’s board nonetheless recommends voting for the continuation decision and the catalogs divestment, it has now “appointed an govt search agency” to determine an appropriate alternative for chairman Andrew Sutch “on the earliest alternative.”
Upon initially asserting Sutch’s deliberate departure in late September, HSF had relayed that the chairman would step down (and retire as director) “as soon as an appropriate alternative is discovered and, in any occasion, at or earlier than the Firm’s annual basic assembly in 2024.”
Subsequent, HSF has “checked out making modifications to” a long-debated settlement with its Blackstone-powered “funding adviser,” Hipgnosis Music Administration (HSM). Amongst different issues, stated adviser’s been gathering thousands and thousands in “advisory” charges (to the tune of $12.5 million in the course of the prior fiscal 12 months) from HSF even all through the Fund’s prolonged catalog-acquisition dry patch.
Hipgnosis Songs Fund “thought of serving discover on” HSM to terminate the pact, “however concluded that it isn’t presently in shareholders’ pursuits to take action,” per its formal discover. If executed earlier than one other adviser was introduced in and accredited by lenders, the termination “can be an occasion of default underneath” HSF’s revolving credit score facility, in response to the doc.
“The Funding Advisory Settlement will be terminated,” HSF wrote of the matter, “apart from for trigger, by the Firm on not lower than 12 months’ discover, with a further one-time termination charge equal to 1 12 months’s advisory charge calculated on NAV as on the termination date.”
In the meantime, the Hipgnosis Songs Fund board additionally went forward and requested the funding adviser to nix an settlement clause “entitling it to amass” the HSF “portfolio on termination of its contract.” Predictably, the adviser “declined to just accept” the proposal.
“In mild of this announcement and prematurely of the Continuation Decision, the Board can be enterprise an additional spherical of engagement with shareholders,” concluded HSF, additional relaying that it “doesn’t envisage any provide” underneath The Takeover Code and that it’d retooled its credit-facility settlement within the wake of the stock-price slip.
Throughout right now’s buying and selling hours, HSF inventory rebounded by 4.11 % to 76 pence (92 cents) per share. Earlier this week, traders in Spherical Hill Music’s personal songs fund voted overwhelmingly to just accept a $468 million buyout provide from Harmony.