Hipgnosis sees shares slump after it slashes value of music catalogue by 26%

04 March 2024 , 11:25

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Hipgnosis, which owns back catalogues for artists including Shakira, has slashed the value of its portfolio (Image: PA Wire/PA Images)

Hipgnosis Songs Fund, a company that invests in music royalties and owns songs from artists like Justin Bieber and Shakira, has slashed the value of its collection by over a quarter.

The fund warned it needs to focus on paying off debts due to mounting problems. Its newest advisor, Shot Tower, reduced the mid-point value of the song portfolio by 26.3% since September's end, resulting in a worth of 1.93 billion US dollars (which is around £1.5 billion).

The troubled group was created by Merck Mercuriadis, known for managing Beyonce, and Chic's Nile Rodgers. They revealed that the drop in net asset value meant they need to use the firm's spare cash to reduce debt.

As a result, they will not be restarting shareholder dividend payouts "for the foreseeable future". This news led to another decrease in the funds shares by 9% on Monday morning. Shot Tower took on the role of independent valuer after disagreements between Hipgnosis Song Management Limited (the firm's investment advisor) and the company over the assets' value.

Despite this setback, Robert Naylor, chairman of Hipgnosis Songs Fund, remains optimistic: "The newly constituted board is making good progress with the due diligence work that will underpin its strategic review."

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He added, "We are disclosing the valuation at this time given its material difference to valuations previously disclosed. The board will provide further detail on this when the due diligence is complete. The board remains focused on identifying all options to deliver shareholder value."

It's getting pretty heated between HSM and the Hipgnosis Songs Fund (HSF) board. HSF, which is looked after by HSM, might sell off its stuff or even shut down. The bosses at the fund have said that a special deal HSM has could make the fund's music collection worth less, which isn't great for finding buyers.

Back in January, HSF was ready to give up to £20 million to anyone keen on buying its music catalogue to attract more interest. Last month, HSM reshuffled its senior management. Founder Mr Mercuriadis, has moved from being the boss to being the chairman. Ben Katovsky, who used to be the chief operating officer at HSM, has taken over as the new boss.

Lawrence Matheson