The battle between the Hipgnosis Songs Fund’s shareholders and its founder Merck Mercuriadis came to a head today, as the fund’s board said it’s considering putting somebody else in charge of managing its collection of hits by artists from Barry Manilow to 50 Cent.
The fund faces a key vote on its future on 26 October, as investors question a £440 million sale of thousands of songs, an inaccurate valuation of an upcoming windfall that meant the fund couldn’t afford to pay a dividend and a share price that has tumbled in the last 18 months.
The Hipgnosis portfolio was valued at $2.8 billion (£2.3 billion) in its last annual results, but its share price values the fund at less than half of that.
Ahead of the vote on whether to continue the fund, its board has now launched a strategic review, which will consider all options, including a change in management. Those options may also potentially include a different management arrangement that keeps Mercuriadis involved. Though the announcement didn’t mention a sale, that cannot be ruled out either.
The board said it had considered severing its agreement with Hipgnosis Songs Management, the Mercuriadis-led and Blackstone-owned vehicle which runs the fund, but doing so without a new team in place would trigger a default. As a result, it launched the review instead.
Mercuriadis, who has managed artists including Beyoncé, Elton John, Guns N' Roses and Nile Rodgers, founded the fund alongside Rodgers in 2018, raising $300 million and buying up catalogues of some of the world’s best-known artists.
The Mercuriadis-led management team holds a call option to buy back the fund’s portfolio if he is ousted. The fund’s board said they asked Hipgnosis Songs Management to remove this clause in their agreement, but the team declined.
The fund has struggled since 2022, falling out of favour with investors as the economic environment became more challenging.
A decision to sell a large portion of its songs to an unlisted fund, also run by Hipgnosis Songs Management, prompted questions among shareholders over whether the deal was struck at the best possible price. The fund’s board says it is still open to better offers for that portfolio should one arise.
Shareholder disquiet grew when the fund pulled its dividend. It said its upcoming windfall from a US Copyright Royalties Board decision to boost the royalties streaming giants must pay for music played between 2018 and 2022 would be lower than previously thought, which meant it could no longer afford to hand money back to investors.
The board also kicked off a search for a new chair, to be announced “at the earliest opportunity”, to replace Andrew Sutch. He announced plans to leave last month.
The review has helped to restore some faith from the market, as shares lifted 1.2p to 74.2p in early trading. That puts the shares back to roughly where they stood at the end of last week, before the dividend announcement.
