Hipgnosis faces showdown with shareholders
PRESSURE is mounting on Beyonce’s former manager as he tries to convince shareholders that he is still hitting the right note with the song fund he founded.
Hipgnosis songs Fund – which Merck Mercuriadis set up in 2018 – offers investors the chance to make money from the royalties of tracks by famous artists.
But on Monday its shares fell to a record low after it scrapped its dividend, warning that us earnings would not be as lucrative as it would have hoped.
Hipgnosis songs Fund is now gearing up for a special shareholder vote next week, which will decide the destiny of the company, as well as whether the board can move ahead with a contentious catalogue sale to the Blackstone fund, Hipgnosis songs Capital (HsC), which is also run by Mercuriadis.
Hipgnosis songs Fund is hoping to convince investors that the agreement to dump 29 music catalogues, worth around £362m, will boost the company’s beleaguered share price and shrink its debt pile, which has become an on going issue in an era of high interest rates.
But the sale of about a fifth of the fund’s music – including hits by shakira and rick James – has started to ruffle feathers.
Asset Value Investors, which owns a 5pc stake in Hipgnosis song Fund, urged shareholders this week to reject the ‘terrible’ deal when they get to vote next Thursday.
Tom Treanor of Asset Value cited the ‘uncompetitive nature’ of the bid process and warned that the price tag was too low, providing very little value for shareholders.
It has also called for an overhaul of the company’s board and a rejection of the so-called ‘continuation’ vote that shareholders have been asked to make.
Sachin saggar, an analyst at investment bank stifel, said the deal with Blackstone had ‘opened a can of worms’ for bosses because the price was ‘materially below what we would have expected’.
‘The issue with the proposed sale is the price and that it is being sold to a related party where there are obvious questions around conflicts of interest,’ he said.
Mercuriadis, 60, is chief executive and founder of Hipgnosis songs Fund, and holds a minority interest in the buyer, Hipgnosis songs Capital, which is backed by Blackstone.
The Mail understands that at least one other major shareholder is planning to publish a public letter ahead of next week’s meeting calling on other investors to reject the deal.
Founded by Mercuriadis and Chic funk guitarist Nile rodgers, the Guernsey-registered investment company exploded onto the music scene.
Hipgnosis songs Fund, which now owns the rights to 65,000 songs, initially made its name by scooping up the music of some of the world’s best-known artists, from the Kaiser Chiefs to Neil Young and Blondie.
And choosing to float on the London market, where the company is based, it eventually joined the FTse 250 in 2020. But the company has failed to keep up this momentum and investors have become increasingly disgruntled with their returns – especially as Mercuriadis’s own life continues to appear lavish across social media.
shares are down over a fifth in the past year alone – slumping as much as much as 28pc since the Blackstone deal was announced. shares gained 3pc, or 2p, to 69p yesterday.
Yet there have also been other troubles at the top.
The fund announced this month that it had suspended a top executive after he was accused of historical sexual assault and harassment.
Hipgnosis songs Fund placed Kenny MacPherson, chief executive of the company’s publishing arm, on a leave of absence as he faces a lawsuit in California. MacPherson denies all the allegations against him.
One senior source in the music industry told the Mail that Hipgnosis songs Fund has seemed like a ‘house of cards waiting to fall’.
‘The company has spent a lot of money on catalogues that aren’t performing,’ they said, explaining how high interest rates then made this debt pile increasingly problematic for Mercuriadis and his team.