Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Hipgnosis Songs Fund has cut the valuation of the assets it owns by almost a tenth and warned investors to be wary of the latest estimate it has put out.
Announcing first-half results on Thursday, the company board said investors should look at the fund’s asset value “with a higher degree of caution and less certainty than might otherwise be attached to it as an accurate reflection of the fair value of the company’s assets”.
The update comes after Hipgnosis, whose catalogue includes songs by Neil Young and Blondie, delayed its results earlier this week due to concerns over the valuation of its assets.
The company owns the rights to thousands of songs but is facing serious questions about its future after shareholders in October voted down a further five-year mandate for the investment trust.
Chair Robert Naylor, who was appointed last month, is now overseeing a strategic review led by Shot Tower, a music rights specialist.
Hipgnosis on Thursday reduced the value of its portfolio by 9 per cent, based on US rulings about the level of royalties that artists should receive. However, it also warned that it was “aware of multiple data points and transactions within the market which are at material discounts to the implied fair value of the company’s assets”.
There is evidence of growing tension between the fund’s board and its investment adviser, Hipgnosis Song Management.
On Tuesday, Hipgnosis said a valuation it had received from an independent valuer was “materially higher” than that implied by recent deals in the music industry.
The board said it had asked Hipgnosis Song Management for an opinion on the value of the assets, but received only a “heavily caveated” response, according to Thursday’s update.
“In the absence of further evidence or insight from the investment adviser, on which to base a judgement on the valuation of the company’s assets, the board has concerns as to whether the fair value is reasonable,” the board said in a statement.
It added that the uncertainty over the asset value has no impact on its banking covenants.
Shares in Hipgnosis fell 1 per cent in early trading.