We would love to hear your thoughts about our site and services, please take our survey here.
To provide shareholders with an attractive and growing level of income, together with the potential for capital growth, from investment in songs and associated musical intellectual property rights.
Find out MoreLondon South East prides itself on its community spirit, and in order to keep the chat section problem free, we ask all members to follow these simple rules. In these rules, we refer to ourselves as "we", "us", "our". The user of the website is referred to as "you" and "your".
By posting on our share chat boards you are agreeing to the following:
The IP address of all posts is recorded to aid in enforcing these conditions. As a user you agree to any information you have entered being stored in a database. You agree that we have the right to remove, edit, move or close any topic or board at any time should we see fit. You agree that we have the right to remove any post without notice. You agree that we have the right to suspend your account without notice.
Please note some users may not behave properly and may post content that is misleading, untrue or offensive.
It is not possible for us to fully monitor all content all of the time but where we have actually received notice of any content that is potentially misleading, untrue, offensive, unlawful, infringes third party rights or is potentially in breach of these terms and conditions, then we will review such content, decide whether to remove it from this website and act accordingly.
Premium Members are members that have a premium subscription with London South East. You can subscribe here.
London South East does not endorse such members, and posts should not be construed as advice and represent the opinions of the authors, not those of London South East Ltd, or its affiliates.
Good to have a exit from this one - any views on the likelihood of a competing bid emerging?
Yes I would have like to clear what I put in all those years ago but I'll take a 10% hit rather than hang around hoping for more and losing this chance again. I don't think I was ever in much profit...a little dividend every 6 months but it was never an exciting ride
Yup - a wonderful get out of jail free card for long-term holders.
Cutting my losses, not sure what lesson to learn other than avoiding investments run by big personalities.
Not a holder here but lovely to see Marshall Wace being caught short.
This report dated 28th March is on SONG's website. It refers in great detail to the due diligence undertaken by the Investment Adviser, or rather the very slap-dash DD that the IA performed. It seems clear that, as a result, rather over-optimistic numbers relating to income, income growth rates and capital value were served up to shareholders by SONG's previous management. It states expressly that investors overpaid for most of the acquired assets.
Conflicts of Interest were present throughout the dealings of previous management and a failure to disclose full details of purchases and contracts between the IA and SONG, meant that investors had no way of establishing the true underlying value of acquisitions. Another conclusion is that SONG was not set up to professionally collect all the revenue to which it was entitled. Its' systems were inadequate. IOW, a landlord who didn't know how to collect his rents.
The report is extremely thorough and one lesson it taught this late-middle-aged, very experienced, investor is to be so careful when a new investment field opens up. The complexity of the music industry is enormous and the various interests that can be purchased are many and very varied. I thought commercial property with its' variety of short-leasehold interests was complicated. Music rights are on several levels of greater complication.
Which, of course, attracts smooth-talking artful dodgers to persuade the shareholders to overpay for assets. Small wonder so many musicians were willing sellers.
The good news appears to be that there are some pretty valuable, long-term, assets owned by SONG. The cupboard is far from bare and this is not an out-and-out fraud. The new management appear to be honest enough and skilful enough to run the business professionally and profitably. Though, quite how profitably is something that probably only time will reveal to the shareholders.
Another skeleton revealed - time to give HSM notice.
A case of 2 plus 2 equals 5 (or six, or seven).
Long suffering holder.
"Investors may despair at developments but can take some reassurance that the valuation is now much more robust"
It seems not.
https://www.lse.co.uk/rns/SONG/amendment-to-operative-net-asset-value-kbazogx05i4i2bf.html
Mounting concerns about disclosure, how SONG’s royalties were valued when interest rates were rising, potential tax liabilities and a controversial deal to sell a quarter of its assets to another fund run by Mercuriadis provoked a shareholder rebellion in October and the appointment of a new board.
Although we advised them to do so, investors might now regret voting against the cut-price $440m asset sale to Mercuriadis’s Hipgnosis Song Capital. Money from that sale could have repaid debt, bought back shares and funded a reinstated dividend.
However, we stand by our recommendation to vote against both the transaction and the continuation vote that took place on the same day. Without these, SONG would not have achieved the “reset” required to put it on a new footing.
Investors may despair at developments but can take some reassurance that the valuation is now much more robust. Their best hope for the shares, which trade 31pc below the reduced NAV, lies in Naylor. A former chairman of rival fund Round Hill Music Royalty, Naylor was headhunted on his achievement of selling RHM at an 11pc discount last year after its shares suffered a similar fall to SONG’s.
As things stand, there are four scenarios for the company: a bid from HSM’s owner, the private assets giant Blackstone; the firing of HSM and a sale to another bidder; the dismissal of the manager and appointment of a new one; or, perhaps the most unlikely, the reappointment of HSM on new terms.
Unfortunately, as Bon Jovi sang, “we’re halfway there”. We advise investors to hold on in the belief, expressed by 5pc activist shareholder AVI, that a “bright future” awaits the company.
Investors in Hipgnosis Songs Fund were left “Livin’ on a Prayer” this week after the music rights fund slashed the value of its portfolio by a third and said dividends would not resume as the trust seeks to cut debt.
The fund, known by its share price ticker SONG, shocked shareholders with the news that Shot Tower, a Baltimore-based valuer hired to review its 65,000-song portfolio in December, had written down their value by 26pc.
This was more than analysts had expected after the fund’s new chairman, Robert Naylor, cautioned shareholders not to rely on the net asset value (NAV) produced by former valuer Citrin Cooperman, which resigned. KPMG also replaced PwC as auditor.
After accounting for currency movements and borrowing, the NAV per share for sterling investors plunged by 35pc to 92.08p.
The shares sank by 8pc on Monday as Naylor told investors that dividends, which were suspended in October, would not resume as the fund prioritised paying down its $674m borrowings, which had exceeded the 30pc of assets limit of its lending agreement.
Analysts said the writedown showed that fund manager Merck Mercuriadis had “clearly overpaid” for songs in the rush to deploy the £1.3bn raised from investors in the three years after the fund’s 2018 launch.
Mercuriadis, the charismatic former record label boss who chairs SONG’s fund manager Hipgnosis Song Management (HSM), previously described his mission to elevate songwriters in the music industry.
Unfortunately, he has done so at the expense of the shareholders he drew into SONG with the promise of steady returns, not linked to the stock market, from royalty investments.
That claim looks hollow with the shares at 63.5p, 36.5pc below their flotation price and paying no income.
In the 2020 annual report, Mercuriadis cited Bon Jovi’s “Living on a Prayer” as an example of the impressive growth in revenues hit tunes were garnering from music streaming platforms. However, amid all the breathless commentary, he said nothing about how much had been paid for any of the fund’s songs or how much money they were individually making.
Another fair point. The BOD are clearly out of their depth. They have done the right thing by obtaining an independent valuation. From here, all they can do is continue taking hopefully good, undoubtedly expensive, advice and, step by step, ensure that they follow best practise in discharging their fiduciary responsibility to us shareholders. A v unfortunate situation.
I think is was voted down because they were taking the good stuff and leaving us with the rubbish. The latest valuation is for the whole lot.
Thanks. Interesting. Well, ultimately, an asset's NAV should be what someone will pay for the asset. Short term we have the overhang of income funds selling out.
Unhooked, Concord bought Roundhill Music Royalties, so there's at least one other. The board have gone to great lengths to get the £20m bid sweetener approved so you would hope they have a good idea who the potential bidders could be.
The thing that confuses me is the fact that the USD440 million sale of 29 catalogues to Hipgnosis Songs Capital was voted down I assume because it was considered too cheap. It may well have been a good deal in light of today's news.
Very fair comment. I can only hope that the discount to NAV that might be applied to a sale is considerably less than the discount that the current share price of 55p is on the restated NAV of 92p...!
A supplementary question might be: are there many/any? specialist buyers of a music portfolio outside of Mr Mercuriadis and his cohorts?
I certainly take your point about investing in sexy new asset classes.
However it looks to me like the market has had a knee jerk reaction to latest RNS and valuation. I can't see that it has said anything we didn't already know.
1. The previous valuations were BS.
2. The company has far to much debt and will be unable to pay a dividend for the forseeable.
Surely this was obvious to anyone who was paying attention and so should have been in the price already.
The questions that need answering now are:
1. Is the new valuation accurate? Hopefully they have taken the opportunity to kitchen sink it.
2. What discount to this valuation will need to be applied to sell the portfolio in an acceptable timeframe?
Material reduction to NAV following independent valuation. Debt to be reduced in line with restated NAV, so divis suspended for the foreseeable.
Note to self: be wary before investing in sexy new asset classes.
Https://www.cityam.com/hipgnosis-independent-valuer-exits-amid-catalogue-dispute/
Merck is just swapping seats to become chairman with Mr Katovsky the current chairman now becoming CEO.
Hypnosis looked a good investment when I bought in a few years back, but greed brought Blackstone in and it all went down the toilet. GLA
Merck Mercuriadis is stepping down as chief executive of music royalties fund manager Hipgnosis Songs Management (HSM).
It comes amid an increasingly intense relationship between HSM and the board of Hipgnosis Songs Fund (HSF), the music royalty fund whose assets HSM manages.
The fund, which owns back catalogues for artists including Justin Bieber and Shakira, is currently undergoing a strategic review process which could see its assets sold, or be wound up completely.
However, bosses at the fund have warned that a call option held by HSM, which allows it to buy HSF’s assets, is damaging the value of the portfolio and therefore impacting upon demand from possible suitors.
And do they should. How Hipgnosis Song Management managed to get that call option, it's disgraceful. Clearly the board want to terminate the advisory agreement but need at least one other bidder to set a fair price before doing so otherwise Hipgnosis Song Management may be able to buy at market cap which would be a disaster. Paying out £20m to cover bidding costs seems ludicrous but it's not because of this hideous call option. I will certainly be voting in favour of the proposal.
Furthermore, the Newly Constituted Board notes the statements made by two independent research reports, which assert that the 29 Catalogues proposed to be sold to Hipgnosis Songs Capital, a fund also managed by the Investment Adviser, which is majority owned by funds managed and/or advised by Blackstone, were growing at materially higher rates to the overall portfolio and were therefore "cherry picked" for sale to Hipgnosis Songs Capital. The Newly Constituted Board is investigating whether this is the case, and if so, whether this was properly and fully disclosed to the previous Board in the investment papers, which included the recommendation provided by Hipgnosis Song Management, and therefore whether the previous Board were provided with the relevant information to enable them to make a decision in the best interests of shareholders.
Just posted on the FT site. Google "Hipgnosis Songs Fund adviser offers to drop clause on music rights" and you should be able to access it (it's behind a paywall otherwise)
I'm guessing the current share price reflects what the market values the assets at if they get sold.