Hipgnosis Songs Fund Limited (LSE:SONG)’s catalogue of royalties, which includes music from Neil Young, Justin Bieber and Mark Ronson, has seen its valuation slashed following an independent valuation conducted by Shot Tower Capital.
Shot Tower’s preliminary findings estimated the fair market value of Hipgnosis' portfolio to be between US$1.8 billion and US$2.06 billion (£1.4 billion and £1.6 billion), a stark contrast to the US$2.62 billion fair value reported in September 2023.
The catalogue is valued between US$1.74 billion and US$2 billion after deducting contingent catalogue bonuses of US$59.9 million.
This revaluation marks a 26.3% decrease, adjusting the net asset value (NAV) per share to approximately US$1.17, down from US$1.73.
Shot Tower deduced the valuation after scrutinising the nature of copyright interests, the type of royalties, and the vintage of the royalty income streams, among other metrics.
As a result of the reduced valuation, Hipgnosis’ board said it will use available cash reserves to pay down debt and reduce gearing.
Hipgnosis, therefore, has decided to continue holding back dividends “for the foreseeable future”.
Robert Naylor, chairman of Hipgnosis Songs Fund, commented: "The newly constituted board is making good progress with the due diligence work that will underpin its strategic review.
“We are disclosing the valuation at this time given its material difference to valuations previously disclosed.
“The board will provide further detail on this when the due diligence is complete. The board remains focused on identifying all options to deliver shareholder value."
Most of the Hipgnosis’ board fled last October when the majority of shareholders voted against the continuation of the fund and booted out former chairman Andrew Sutch.
The embattled investor in music rights is entangled in a complex High Court dispute with founder and former investment manager Merck Mercuriadis relating to allegations of diverting business opportunities.
Hipgnosis shares fell 14% today, bringing year-on-year losses to nearly 40%.