Hipgnosis Songs Fund Limited (LSE:SONG) shareholders chose 'no' in a continuation vote and also for the investment trust's chairman, Andrew Sutch, to hit the road.
A total of 83.2% of shareholders voted against the continuation, the company confirmed in a statement, meaning the planned vote on a proposed £440 million music rights sale to Blackstone will no longer go ahead.
The backing of a continuation resolution is normally a formality for trusts, but a rare rejection generally means investors want the trust to be wound up.
However, it can also allow for a reset of the company, including a change of manager.
Having already launched a strategic review, late yesterday, the company confirmed the exit of two directors, Andrew Wilkinson and Paul Burger, under pressure from some major investors, who also had called for the removal of the chairman.
Today, Sutch's reappointment was rejected with a 71.5% share of the voting.
Sylvia Coleman was the one director who was backed by investors, continuing as senior independent director.
She said: "The board and the investment adviser have each engaged widely with investors over recent months. While shareholders have not supported our proposed transaction or the continuation vote, it is clear that they share our belief in the inherent quality and potential of these assets.
"The directors are now expediting the appointment of a new chair who will drive the strategic review we have already announced, with a clear focus on delivering improved shareholder value."
What will losing the continuation vote do?
Major shareholders calling for change, including Asset Value Investors, owner of a 5% stake, which said in an open letter last week that "a reset is urgently required".
It also stressed that a vote against continuation would "emphatically NOT" automatically trigger a wind-up of the company or immediate asset sales.
It said it would only require the board to consult with shareholders on the future direction of the company.
Hipgnosis Songs Fund's own prospectus and the AGM circular state: "If a continuation resolution is not passed, the directors are required to put forward proposals for the reconstruction, reorganisation or winding-up of the company to the shareholders for their approval within six months following the date on which the relevant continuation resolution is not passed.
"These proposals may or may not involve winding-up the company or liquidating all or part of the company’s then existing portfolio of investments and, accordingly, failure to pass a continuation resolution will not necessarily result in the winding-up of the company or liquidation of all or some of its investments."
Analysts at broker Stifel seemed to agree in a note at the time, saying: "We think any incoming chairman would now recognise a vote against continuation and the first disposal as being a protest vote against the incumbents and the cleanest method to ensure shareholders regain control over the company and not an order to commence an immediate orderly sale of the portfolio."