Hipgnosis Songs Fund Limited (LSE:SONG), the music royalty fund, could be heading in the same direction as Round Hill Music Royalty Fund Ltd (LSE:RHMP, OTC:RHILF), which is set to be bought for US$469 million by Concord, as analysts continue to point to the large gaps between the share price and net asset value (NAV) of the funds.
At US$1.15 per share, Round Hill’s purchase offer was able to provide investors with a nearly 70% premium to Thursday’s closing share price (US$0.69) while providing the new buyer with an 11% discount to the US$1.30 NAV.
Overall this meant the share price was valued at an 88% discount to the NAV, something analysts at Stifel believe is commonplace in the investment fund sector due to strong value in the funds and investor “pessimism going too far”.
“We were expecting Hipgnosis to be the first to announce some detail over a possible transaction, such as a return of capital. In fact, this announcement helps highlight there is significant value in the Hipgnosis portfolio,” the investment bank’s analysts added.
Hipgnosis, which was founded by music producer Nile Rodgers and owns the rights to work by artists such as Red Hot Chili Peppers, Neil Young, and Blondies, operates with an NAV of over US$3 billion despite the group’s market cap of a little over £1 billion.
“We expect further M&A activity,” Stifel added.
Shares in Hipgnosis lifted close to 12% on Friday, having opened trading at around 80p.