Hipgnosis Songs Fund (HSF) has delayed the publication of its half-year financials due to a potential disconnect between the involved catalogs’ appraised value and actual market worth.
The publicly traded songs fund, which had been scheduled to post today its financials for the six months ended September 30th, formally announced the delay and its underlying “concerns” this morning.
According to the troubled entity, which last week added a veteran activist investor to its board, the IP valuation “received from its independent valuer is materially higher than the valuation implied by proposed and recent transactions in the sector.”
Among these proposed and recent transactions, the announcement proceeds, are the investor-rejected sale of 29 catalogs to Hipgnosis Songs Capital for $417.5 million (“net consideration,” that is, a figure well beneath the initially identified price tag of $440 million) as well as the more recent and seemingly closed sale of “non-core assets” to Kobalt for $23.1 million.
As a result of the discrepancies, HSF’s Robert Naylor-chaired board “sought advice” from its Blackstone-powered investment adviser, Hipgnosis Song Management, “on their opinion on the independent valuer’s valuation,” per the text.
“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,” continues HSF’s far-from-ideal account of the situation.
Now, HSF “expects” to publish the earnings report sometime before December 31st. Of course, it’s unclear exactly what another 12 or so days will do to improve the valuation conundrum, about which we’ve reported for several years. Way back in January of 2021, for instance, a Stifel analyst downgraded Hipgnosis stock due to concerns relating to its valuation methodologies and cashflow.
And in December of 2022, new concerns yet were raised as Hipgnosis Songs Fund refused to lower its catalog valuation amid (among other things) economic uncertainty, rising rates, and an IP-sales slowdown.
In any event, Merck Mercuriadis’ aforementioned Hipgnosis Song Management (HSM) promptly fired off an official response to HSF’s performance-analysis delay.
“Hipgnosis Song Management has fulfilled its duties to the Company with respect to both the independent valuation and preparation of the interim results in a timely and efficient manner,” maintained HSM.
“Notwithstanding the decision of the Company’s Board to delay publication of the interim financial statements, the Investment Adviser will continue to work in a constructive manner to support the interests of the Company and its shareholders,” the entity concluded.
While time will reveal the unique situation’s precise outcome, it goes without saying that recent events paint an extremely discouraging picture for Hipgnosis Songs Fund, its investors, and Mercuriadis; the latter individual, the fund, and HSM alike are also grappling with litigation levied by the liquidators of a long-defunct Hipgnosis entity.
When this piece was published, Hipgnosis stock was trading for just under 68 pence per share, representing a two percent dip and a market cap of approximately $1.06 billion, or well beneath the appraised value of HSF’s IP.