LONDON (CelebrityAccess) — Hipgnosis Songs Fund Limited, a company providing investors pure-play exposure to music-related intellectual property rights, revealed the financial results for the six month period ending on September 30.
According to Hipgnosis, the company recorded a concerning 9.2% decline in the Operative Net Asset Value (NAV) per share, with the company’s stock price falling from $1.91 on 31 March 2023 to $1.22 at the end of the reporting period at the end of September and just $.88 today. Hipgnosis attributed the sharp drop primarily to a reduction in the Fair Value of the Portfolio, which is likely to raise concerns among stakeholders about the value of their investments.
Gross revenue declined during the reporting period, falling from $86.4 million recorded in the previous period to $63.2 million during the first six months of 2023. However, net revenue actually grew for Hipgnosis during the period, bolstered by a one-time infusion of cash following the CRB III copyright ruling and growing 14% year over year to $65.8 million.
During the reporting period, Hipgnosis continued to accrue debt, with total outstanding debt growing to $674.0 million, representing 32.0% of the company’s Operative NAV.
Continuing internal governance issues are also likely to raise concerns with investors, following a rejection of the Continuation Resolution at the recent shareholder meeting, the withdrawal of planned dividends in October and the suspension of upcoming dividends for the forseeable future.
Hipgnosis Chairman Robert Naylor also voiced concerns about the company’s governance, in particular, its investment advisor, Hipgnosis Songs Fund, and a lack of transparency over potential conflicts of interest.
In a statement included with the financial filings, Naylor said: (emphasis added)
“I am delighted to be appointed to the Board, with strong backing from shareholders. The Board are clear we are acting in their best interests.”
“I am pleased with the progress made on the ongoing strategic review. The Board, through its advisers, has begun due diligence on the Company’s assets with Shot Tower LLC, a specialist music rights practice, acting as lead adviser. This process will help the new Board bring forward proposals for delivering value to shareholders.
“Notwithstanding this progress, since I joined the Board there has been a regular occurrence of issues raised as a result of ongoing failures in the financial reporting and control process. Whilst we consider substantial progress has been made in identifying and rectifying these issues, we have had to suspend the dividend for at least the remainder of the year in order to ensure compliance with our banking covenants.
“The newly constructed Board are aware of multiple valuation data points. The Board, made up entirely of non-executive directors, has sought advice from the Investment Adviser, as the Company’s delegated executive function, for their opinion as to the fair value of the Company’s assets.
“Regrettably, the Investment Adviser initially refused to provide an opinion. While the Investment Adviser did eventually provide an opinion to the Board, it was heavily caveated. Whilst the Board sought for correspondence with the Investment Adviser on the matter to be published on the Company’s website in order to provide transparency for shareholders, the Investment Adviser has refused to consent under the confidentiality clauses of the Investment Advisory Agreement.”
“We note the announcement from Hipgnosis Song Management stating that they will ‘continue to work in a constructive manner to support the interests of the Company and its shareholders’. On behalf of the Board, I therefore urge the Investment Adviser to provide the Board with their opinion as to the fair value of the Company assets, without caveats, such that we can provide greater certainty and transparency to our shareholders.”
