Hipgnosis Songs Fund Limited (LSE:SONG) founder Merck Mercuriadis has stepped back from his role as chief executive of the fund's investment manager to become chairman as the firm faces the sack.
Ben Katovsky, currently president and chief operating officer, will be appointed CEO, with Mercuriades in charge of "engagement" with songwriters, artists and the music industry, as well as leading acquisitions.
Mercuriadis said the firm is "at an important juncture in our development where the services we provide to our clients are of paramount importance".
Katovsky noted that HSM "has two clients, which we are proud to service, and shareholders who are clear in their vision, ambition and on-going commitment to grow music as an asset class" and is "confident that HSM is already the best platform for both capital deployment and song management to create value from the songs that we manage".
He mentioned his hope to work constructively with the board of Hipgnosis Songs Fund, where last October shareholders rejected a continuation vote and a controversial asset sale to HSM-owner Blackstone that HSM had agreed, meaning it could be sacked as manager, with a strategic review by a new board still ongoing.
Katovsky said he believes the firm "is best able to deliver value for their shareholders whether they decide the company has a future as a long-term operation or wish to pursue the sale of assets following their strategic review".
HSM said it has requested the board of Hipgnosis Songs Fund approve the planned transition of Mercuriades’ role.
Analyst Sachin Saggar at Stifel said he did not think the move would move the dial for shareholders, based on what they have heard.
"In our view, there was a window a few months ago where we thought the stepping back of the [Mercuriadis] could be sufficient to appease investors and allow HSM to continue being the IA of the listed fund.
"Our engagement with shareholders since suggests that is unlikely to be a palatable option today."
Saggar also noted that Blackstone is "also caught between a rock and a hard place as Merck Mercuriadis is a key man within the prospectus and this is the only option available to them without triggering the clause".
For the SONG fund, two scenarios are likely, the analyst said: "Either the portfolio is sold in the short term, but that appears unlikely given the issues that need to be resolved and that there is unlikely enough 'juice' for investors from a sale.
"Or our base case is that the trust continues for some time and in this scenario shareholders will be looking for a re-rating of the share price."
With HSM in place, "that seems unlikely", hence, Saggar suggested it will "require a full rebrand and refresh (i.e. change of investment adviser)".