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(Alliance News) - Hipgnosis Songs Fund Ltd, which was due to release its half-year results on Tuesday, announced they will be delayed until the end of the year, amid a discrepancies between an independent valuation of its intellectual property assets and its manager's own view.
The embattled investor in music rights said an independent valuer, Citrin Cooperman, found its assets have a value "materially higher than the valuation implied by proposed and recent transactions in the sector", particularly the proposed sale of assets to Hipgnosis Songs Capital, a joint venture between between investment adviser Hipgnosis Song Management Ltd and private equity firm Blackstone Inc.
The sale of assets to Hipgnosis Songs Capital for a net USD417.5 million reflected a 24% discount to the carried value of the assets as of March 31, the fund's financial year-end, while another recent sale of non-core assets for USD23.1 million was at a 14% discount to their valuation on September 30, the end of its first half.
After receiving the higher valuation from the independent valuer, the fund "sought advice" from its adviser on its opinion on the independent valuer's valuation. "Hipgnosis Song Management Ltd eventually provided an opinion, which was heavily caveated, such that the board has concerns as to the valuation of the company's assets in its interim results," Hipgnosis Songs Fund said.
Later Tuesday, the investment adviser responded: "Hipgnosis Song Management has fulfilled its duties to [Hipgnosis Songs Fund] with respect to both the independent valuation and preparation of the interim results in a timely and efficient manner.
"Notwithstanding the board's decision to delay publication of the interim financial statements, the investment adviser will continue to work in a constructive manner to support the interests of the company and its shareholders."
The discounted sale of assets to a partnership that includes Hipgnosis Song Management, followed in October by a profit warning and decision to skip paying a dividend, triggered a shareholder revolt. In November, the fund brought in Rob Naylor, a former director at peer Round Hill Music Royalty Fund Ltd, as its new chair.
"This is an early blow to the credibility of the new Song board, and casts further doubt over the credibility of the independent valuer, Citrin Cooperman," commented analysts at JP Morgan.
"Given all that has occurred over recent months we are surprised that another party had not been hired to provide a valuation, as was the case at [March 31] when Kroll was appointed to consider the 'reasonableness' of CC's assumptions."
Hipgnosis Songs Fund on Tuesday said it expects the publish the interim results before the end of the year.
Its shares were down 1.4% at 68.12 pence early Tuesday in London, having earlier fallen to 66.80p. They are down 19% in the past year though above their 52-week low of 58.00p.
JP Morgan said it retained an 'overweight' recommendation on Hipgnosis Songs Fund shares, despite "yet another SONG own goal".
By Tom Waite, Alliance News editor
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