Hipgnosis Songs Fund Limited (LSE:SONG), the song rights company, has been upgraded by analysts at Jefferies Group (NYSE:JEF) ahead of its first continuation vote later this year.
The stock's 46% discount to its fund’s net asset value (NAV) now means the US bank rates the company a ‘buy’.
With the firm’s continuation vote looming, Jefferies thinks management will attempt to sell some of its library to “repay debt and/or make share buybacks”.
If these sales occur, which would be before October – the latest date for its AGM – it will significantly narrow the difference between the share price and the NAV.
Jefferies said: “The fund could still dispose of an institutional acquisition, like Kobalt Fund 1 - consisting of 33,000 songs, acquired for $323m in September 2020.
“Alternatively, the group could potentially sell a minority 'strip' of its entire portfolio.”
The company was started by industry veterans Merck Mercuriadis and Nile Rodgers in 2018 and now owns the royalties to songs by artists like 50 Cent, The Red Hot Chili Peppers and Neil Young.
Earlier this month rockstar Rod Stewart backed away from discussions with Hipgnosis, which had wanted to purchase his back catalogue.