SONG.L Share Chat (SONG)

Reuters report that Merck Mercuriadis, who stepped down as CEO to become Chairman in February, will step down as chairman on completion of acquisition.

Https://www.telegraph.co.uk/music/news/what-went-wrong-with-hipgnosis/

Yup, disappointing. I was going to sell first thing this morning on the basis that a lot of investment houses were selling down their positions which led me to think no new counter bid was coming. Sadly I was a day late. I need to check the details again to see when we'll be paid, but I'll probably hold too now until we get paid out.

Concord bows out of the race. Oh well, another poor call from me.

I guess I'll hang on as a hedge against weaker sterling against the dollar by the time Blackstone coughs up.

Hope not.

I'd be very happy with one more from both parties.

Hope to never hear the name MM ever again.

Is this the end of the bidding for our great catalogue?

Everyone has a different definition of "a few".

Questor: Hold on to embattled pop music investment fund as bid battle hots up

https://www.telegraph.co.uk/money/investing/stocks-shares/questor-hold-on-pop-music-investment-fund-bid-hots-up/

Still looks messy, this is among the flurry of RNS today.

HSM prepared to protect contractual rights.

https://www.lse.co.uk/rns/SONG/hsm-prepared-to-protect-contractual-rights-2aj1x3wte00cxh0.html

Wish I'd been watching when it spiked to c110p today, I'd have taken that.

Except that was a few days ago and was below what is now being offered

Things are warming up.

https://news.sky.com/story/kylie-music-label-bmg-in-rival-approach-for-hipgnosis-13120881

I'm glad I forgot to sell on Friday. It's nice to have people fighting over shares I had written off.

Covered by Sky too. They usually have their fingers on the pulse.

https://news.sky.com/story/blackstone-tunes-up-1-2bn-bid-for-blondie-music-owner-hipgnosis-13119025

Maybe I bailed too early

https://www.musicbusinessworldwide.com/strap-in-blackstone-ready-to-bid-1-5-billion-for-hipgnosis-songs-fund/

Decided to bail out and take the loss before any further disasters - managed to sell one batch earlier but second batch of 500 keeps being rejected.

Yes I agree I've a whole kennel of dogshares...I'm sticking to FTSE 250 from now on...the gains from these kind of punts are offset too much by the losses

I'm out at a very small loss but happy to leave.Too many uncertainties and no getting paid to wait(divis). I have several other dog shares I would like this to happen to too! We live and learn.

Done. Bailed. For a princely profit of £180 I've spent a lot of time, a lot of effort and been through plenty of stress.... max effort, min return, that's investing in the UK these days.

I'll be glad to get out too. Will probably hold a few days to see if any likelihood of anything else happening but little point in holding till the bid eventually completes as there's no dividend now.

Am I right in thinking that MM and Co have some kind of "matching bid" rights?

In any event, I'm sure we haven't heard the last of him unfortunately.

All seems a bit dodgy with the revaluation and a bid straight after.

Add that new short to the mix and it looks even murkier.

Good to have a exit from this one - any views on the likelihood of a competing bid emerging?

Does anyone think it's worth holding out for the US markets to open...seeing as there's talk of the share possibly moving to the US market? Maybe some interest there? Otherwise I'm cutting my losses now

Yup - a wonderful get out of jail free card for long-term holders.

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?

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.

Seems to be well supported at these levels. The new board members bought shares in November and the Chairman's honest appraisal of the issues feels like a breath of fresh air - plus the large investers (holding 60%) appear to be on board. A 10% revenue growth should also provide more options to those conducting the strategic review.

I'm surprised this hasn't fallen a lot further.

Best thing is for someone who knows what they're doing to take it over and sack the current board.

Unhooked, register for the call on 4th Jan, you may get your answer. It'll be entertaining. At the end of the day there's value in the assets, I'm just surprised they haven't sacked investment advisor yet given the failed continuation vote.

Have you ever read a Chairman's Statement that reads like this? How on earth did a listed company with supposedly £2.5bn in assets get itself into such a pickle?

"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."

Almost bought into these a year or so ago and now pleased that I did not.

Unflattering article

https://www.ft.com/content/e2550128-2d10-499d-a334-18116a7999ca

=== or ===

https://archive.ph/odtUl

So does this mean that SONG can back out of the $471 million sale to Hipgnosis Capital? And, if so, for what penalty?

Historically, you can't argue with actual cash trades in the market as being the most representative of an asset's current market value. Unless the valuer can provide a watertight reason for why a recent, uncompleted, sale is grossly misleading. So far, SONG isn't giving us that reason.

Also, is there anyone else here who is mighty confused by references to a whole bunch of companies containing the name 'Hipgnosis', but which are all under different ownerships and not beneficially owned by SONG? I find it very misleading.

Ooops. Another poster on ADVFN pointing out that manager's fees actually based on company valuation (SP).

I really should know which is correct as a shareholder. Apologies to anyone who feels misled by any of my posts (although you should be used to that if your a SONG shareholder).

Good point raised by a poster on ADVFN about manager's fees being based on NAV so, in a way, incentive for the Company to get NAV down whereas Manager has a different incentive.

Maybe Chris Mills already at work.

Might lead to to difficult discussions with bankers re covenants.

"The valuation the Company received from its independent valuer is materially higher than the valuation implied by proposed and recent transactions in the sector, in particular, the proposed sale of assets to Hipgnosis Songs Capital for net consideration of $417.5 million, reflecting a discount of 24.3% to the valuation of these assets as at 31 March 2023, and the recent sale of non-core assets of $23.1 million, reflecting a 14.2% discount to to the valuation of these assets as at 30 September 2023."

So, SONG try to sell off some assets to a mate at a big discount and then seem surprised when their independent valuer continues to value the catalogues at a higher figure. Time for Chris Mills to start banging a few heads together.

Https://www.youtube.com/watch?v=23zLefwiii4

"The Board of Hipgnosis is pleased to announce the appointment of Christopher Mills as an Independent Non-Executive Director of the Company effective immediately."

Should be interesting to watch how things develop from here.

Here's hoping, 128pps would do nicely thnak-you.

The gross consideration reflects a 14.2% discount to the valuation of the Songs prepared by the Company's Portfolio Independent Valuer as at 30 September 2023

I wonder if that means we should think of the NAV overall being 14.2% lower than they say it is?

Oops. Accident prone. I do pick 'em!

This could get messy.

Service of Claim

Further to the disclosure in the 2023 Annual Report, on page 100, Hipgnosis Music Limited (in liquidation since March 2018) ("Hipgnosis Music Limited") has served proceedings against Mr Mercuriadis, the Investment Adviser and the Company in the English High Court. In summary, Hipgnosis Music Limited alleges a diversion of business opportunity from Hipgnosis Music Limited (of which Mr Mercuriadis was previously a director) to the Company and the Investment Adviser and also alleges that the Company unlawfully assisted Mr Mercuriadis with, or received, this alleged diversion. Mr Mercuriadis, the Investment Adviser and the Company deny such claims and intend to vigorously defend them. The Company is not insured as to the costs of dealing with this claim.

Https://www.proactiveinvestors.co.uk/companies/news/1034065/hipgnosis-reveals-legal-claim-adding-to-its-mounting-woes-1034065.html