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Hipgnosis Songs Fund has delayed the release of its first-half results after the music rights owner expressed concern over the value of its assets.
The London-listed group said on Tuesday a valuation it had received from an independent valuer was “materially higher” than that implied by recent deals in the music rights industry.
After consulting Hipgnosis Song Management, which helps manage the listed music fund, it decided to push back the publication of its first-half results. It now expects to publish its results by the end of December.
Hipgnosis Songs Fund was founded by former band manager Merck Mercuriadis in 2018, who sought to turn music rights into a mainstream asset class during the era of low interest rates. However, higher interest rates have pushed up the “discount rate” that is used to calculate asset values into the future, cutting song right valuations.
The decision to delay the results is the latest blow to Hipgnosis, whose shares have fallen by a fifth this year and were down 3 per cent in early trading on Tuesday.
The company already faces doubts over its future after investors rejected its attempt to secure a further five-year mandate in October.
In a statement on Tuesday, Hipgnosis Songs Fund said “the valuation the company received from its independent valuer is materially higher than the valuation implied by proposed and recent transactions in the sector”.
It highlighted a proposed $417.5mn transaction to sell a large portfolio of its music rights to a fund owned by private equity group Blackstone, representing a discount of 24 per cent to the portfolio’s valuation at the end of March. That deal was blocked by investors in October. It also pointed to a sale this month that offloaded $23.1mn of non-core assets at a 14 per cent discount.
Hipgnosis said the board had asked Mercuriadis’ Blackstone-backed Hipgnosis Song Management, which manages the fund, for its view on the independent valuation.
“Hipgnosis Song Management Limited eventually provided an opinion, which was heavily caveated, such that the board has concerns as to the valuation of the company’s assets in its interim results,” it said.
The questions over the value of its assets highlights the strained relations between Hipgnosis’ board and Mercuriadis, a former band manager who is now chief executive of the fund’s investment adviser.
Last month, Hipgnosis said it was searching for a new auditor after PwC, which checked its books since 2018, refused to reapply for the job.
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