Hipgnosis Songs Fund Limited (LSE:SONG) has published a promised letter to shareholders about its proposed US$440 million music rights sale but the deal could be as dead as the company’s prostrate elephant logo, according to analysts.
After it missed yesterday’s scheduled publication date, the fund issued a statement late this morning saying the circular for the proposed deal with investment giant Blackstone has been approved by the UK Financial Conduct Authority (FCA) and has now been published.
But there has been a “unanimous” dislike of the deal, analysts at broker Stifel said, with shareholders “deeply unhappy and minded to vote against”.
They added: “For all intents and purposes, we think the deal is dead, and it is just a matter of whether the board accept this, or force an unnecessary vote.”
The analyst comments were issued just before the statement was issued by the fund.
Hipgnosis, having been speaking to shareholders about the “strategic rationale and merits” of the deal, said the circular includes several points that it thinks “will provide shareholders with greater opportunities to realise value in a shorter timeframe” should its hoped-for share price re-rating not occur.
These are that for further continuation resolutions to be put to shareholders in January 2026, again in 2028 and then at every third annual shareholder meeting thereafter; further amendments to the agreement with investment advisor Hipgnosis Song Management so it can be terminated by the company on 12 months' notice; and that such a termination notice will be served if the share price stands at an average discount to operative NAV of 10% or more, measured on average over the month of January 2025.
Also, chair Andrew Sutch has given notice of his intention to retire once a replacement is found, or at the latest by the company's 2024 AGM.
Stifel said: “Mending bridges with shareholders also appears a tall task, and it's not clear how this can be done given what appears to be low levels of trust.
“In our view, the best path forward would be a full refresh of the board, to put the fund on a stable footing. The positive for shareholders is that the backdrop for the music sector appears strong and there is considerable value to be realised over time if this can be managed in a sensible way.”