UK-based music rights fund, Hipgnosis Songs Fund (HSF), is likely to hold its 2023 “continuation vote” on 26 October, which will determine whether the fund will continue as a publicly-traded entity. HSF has recently announced several changes that are seen as efforts to appease shareholders and secure their approval to continue. Shareholders have shown frustration due to the gap between the firm’s operative Net Asset Value (NAV) and its share price on the public market. HSF is currently considering a $440m transaction to sell 29 of its music catalogs to another Hipgnosis company, which could potentially boost its share price closer to its operative NAV. These potential changes may impact the outcome of the continuation vote.
Among the changes announced, HSF’s board chair, Andrew Sutch, will step down, and Andrew Wilkinson will retire, reducing the board to five directors. If shareholders vote to keep HSF as a publicly-traded fund in the continuation vote, another vote will be held in January 2026. The fund also made amendments to its Investment Advisory Agreement, giving its investment advisor, Hipgnosis Song Management (HSM), a 12-month notice period for termination. If HSF’s share price remains at a discount to operative NAV of 10% or more in January 2025, the board intends to terminate the agreement with HSM. However, the board reserves the right to withdraw the termination decision during the notice period. If HSM is terminated, it may have a first-refusal option to acquire HSF’s copyright portfolio and potentially seek backing from Blackstone.
The potential $440m transaction is connected to the date of the continuation vote as non-Hipgnosis firms have been invited to make bids for the same portfolio. These third-party bids face obstacles, such as HSM’s matching right, which grants Hipgnosis Songs Capital (HSC) the opportunity to match rival bids and secure the acquisition of the catalogs. If a superior offer is received during the “go-shop” period, the continuation vote and AGM may need to be adjourned to November. The HSF board and HSM believe that the fund owns a unique portfolio of culturally significant songs and are committed to achieving shareholder value through a re-rating of the share price.