The odds of a takeover of Hipgnosis Songs Fund were raised today after a sharp cut in the estimated value of the firm’s portfolio saw its shares tumble.
Hipgnosis, which owns a catalogue of songs by the likes of Blondie Neil Young, today said its portfolio had been revised down by advisers Shot Tower to a fair market value of $1.8-$2 billion from a previous valuation of $2.62 billion in September. That would result in a cut to its net asset value (NAV) per share to 92p down from 137p.
Shares in Hipgnosis sunk as much as 15% by Monday afternoon, with the stock sinking to a new all-time low of 53p. It is now down around 50% since its 2018 IPO, and is now trading with a more than 40% discount on the value of its portfolio.
The firm’s shareholders previously rejected a proposed sale of a $440 million music rights portfolio to a private sister fund owned by Blackstone and Hipgnosis Songs Management (HSM) on the basis that the offer price was too low.
But analysts at JPMorgan today said: “It is imperative that, even in the event of [Hipgnosis] continuing as an ongoing listed vehicle, it sells some catalogues to repay debt. Somewhat ironically, it would already have done this if shareholders had voted in favour of the asset sale to Blackstone, with this now looking like a missed opportunity.
“But, by paying NAV now, Blackstone/HSM could acquire all or part of the portfolio at a lower valuation than the aborted partial offer. Thus, overall, the only silver lining of today’s announcement is that it increases the likelihood of a bid from HSM, backed by Blackstone, that would no longer be seen as low ball.”
