Hipgnosis Songs Fund Limited (LSE:SONG) founder Merck Mercuriadis and his Hipgnosis Songs Management (HSM) firm refusing to provide indemnity over a High Court legal challenge confirms that the relationship between the board and investment manager is at "an all-time low", said analysts at Stifel.
This morning, the SONG investment trust said it was launching a new High Court claim to try and get indemnity, after legal proceedings were served upon Mercuriadis, HSM and the trust in November.
Stifel analyst Sachin Saggar said this litigation and claims about cherry-picking the best songs to sell are "tools being used to send a clear message that there needs to be a parting of ways on sensible terms, in our view".
However, Saggar said he has some sympathy with HSM not providing indemnity to the listed fund: "Cash resources are already stretched and with the listed fund's share price remaining weak, the prospect of an increase in management fee income appears low, given it is based on the fund's market cap".
While no figures and quantum have been provided about the size of the claim, apart from that it is "substantial", the analyst said he believes any potential loss due to this claim will be "small relative to the size of the fund".