Hipgnosis showdown as shareholders vote against board and oust chairman
Hipgnosis Songs Fund shareholders have rocked the company, going against board recommendations with the majority voting ‘no’ to a continuation as they show the chairman the door.
Over 83 per cent of shareholders in Hipgnosis voted against the company’s continuation during its annual general meeting on Thursday morning.
Shares in the Hipgnosis Songs Fund spiked as much as 3.5 per cent on the news.
It has put a halt to the planned $440m (£363.6m) sale of music rights to investment firm Blackstone, which owns a majority stake in Hipgnosis Song Management, which will no longer go ahead.
Following a strategic review, shareholders also gave chairman Andrew Sutch the cold shoulder as 71.5 per cent voted for him to go. In September, Sutch had announced his intention to step down from the role.
Hipgnosis confirmed the departure of two directors, Andrew Wilkinson and Paul Burger, late yesterday.
The board now has six months to table proposals for the “reconstruction, reorganisation or winding-up” of the fund. It could end in a partial rather than full portfolio sale.
Metage Capital, a major investor in Hipgnosis, had urged shareholders to vote against the continuation and portfolio sale, as did other investor Asset Value Investors (AVI).
Metage’s chief investment officer Tom Sharp said: “It was good to see such an emphatic statement from shareholders wanting to see better governance at Hipgnosis Songs Fund.
“We look forward to a reinvigorated board working to bring the Company’s iconic songs to the widest possible audience.”
Sylvia Coleman, senior independent director of Hipgnosis Songs Fund, said: “The Board and the Investment Adviser have each engaged widely with investors over recent months.
“While shareholders have not supported our proposed transaction or the continuation vote, it is clear that they share our belief in the inherent quality and potential of these assets.
“The Directors are now expediting the appointment of a new Chair who will drive the Strategic Review we have already announced, with a clear focus on delivering improved shareholder value.”
Furthermore, Marzio Schena, chief executive of European royalties investment platform ANote Music, said: “It’s that wave that Hipgnosis has been riding in recent years, and whilst today’s vote is a setback to those plans, it is not necessarily all bad news for Hipgnosis.
“Rather, in the rejection of a fire sale, investors are signalling confidence in the underlying value of music as an asset and in particular, the strength of Hipgnosis’ catalogue.”
Founded by former music manager Merck Mercuriadis in 2018, Hipgnosis is a company that invests in music rights.
It initially stunned investors by presenting music royalties as a valuable alternative to low-yielding government bonds. But Hipgnosis’ situation has gradually taken a turn for the worse as interest rates have risen, causing the value of songs to drop and investors to raise concerns.
Hipgnosis recently revealed lower-than-expected earnings from its US song catalogue, leading it to scrap a dividend payment due to meet debt covenants.
Before the continuation vote, there were signs of investor wariness. Asset Value Investors (AVI), which manages a five per cent stake in Hipgnosis, released an open letter to fellow shareholders, saying “a reset is urgently required”.