Hipgnosis Songs Fund, a UK-listed company that holds music rights for artists like Neil Young and Nirvana, is considering selling off some of its catalog to bridge the gap between its share price and asset value. The CEO, Merck Mercuriadis, believes that the company’s potential and value are not adequately reflected in its current share price. In response to pressure from investors and the decline in share price, the company is exploring options to enhance its value.
Mercuriadis plans to announce a new strategy in August, with a shareholder vote scheduled for September to determine the fund’s future. While the company’s core strategy has been to acquire and hold sought-after music assets to maximize shareholder value, it now faces limitations due to its discounted share price, preventing it from buying new song rights without diluting existing shareholders.
The company’s net asset value per share decreased by 9.2% in the year to March, primarily due to asset amortization.
A potential challenge in selling music catalogues lies in the tax implications. As intangible fixed assets for UK corporation tax purposes, selling all of its music catalogues could result in a corporation tax charge of up to $245 million.
Currently, Hipgnosis Songs Fund’s shares are trading at a 50% discount to its net asset value, leading the company to explore various avenues to close this gap and unlock its true potential.