Hipgnosis Songs Fund (HSF) is preparing for its 2023 ‘continuation vote’ at its Annual General Meeting on October 26. Shareholders will decide whether to keep HSF as a publicly-traded investment entity focused on music rights. The vote is being closely watched due to the significant gap between HSF’s operative Net Asset Value and its share price. HSF has proposed a $440m transaction to sell 29 of its catalogs to another Hipgnosis company, Hipgnosis Songs Capital, which it believes could help re-rate its share price and bring it closer to its Net Asset Value. Several new changes announced by HSF today, including the resignation of its board chair and director, have raised speculation that they are concessions to keep investors confident and supportive of the fund’s long-term prospects, and likely to vote in favor of continuation.
In addition to the continuation vote, HSF confirmed amendments to its Investment Advisory Agreement that would potentially allow for a notice period to end its agreement with Hipgnosis Song Management (HSM), its investment advisor. Under certain circumstances, including a share price discount of 10% or more to its operative Net Asset Value, HSF can serve notice to terminate the agreement. However, the board retains the ability to withdraw its termination decision during the notice period. If termination were to occur, HSM would have a first-refusal option to acquire HSF’s copyright portfolio, potentially with backing from Blackstone, the backers of Hipgnosis Songs Capital.
The continuation vote is connected to the $440m offer made by Hipgnosis Songs Capital to acquire the 29 catalogs from HSF. While other companies are also invited to make bids during a limited-period ‘go-shop’ clause, the offer from Hipgnosis Songs Capital is still the favored option. However, if a superior proposal is received during the ‘go-shop’ period, it may be necessary to adjourn the continuation vote into November. The HSF board and its investment advisor believe in the long-term value of HSF’s portfolio and its potential for outperforming the wider music market. They are determined to re-rate the share price and deliver value to shareholders.
