Hipgnosis Songs Fund Limited (LSE:SONG) said the discovery of a double-counting error has meant the net asset value of its music rights portfolio, which includes the likes of Beyonce, Neil Young and Justin Bieber, has been reduced even more.
As the valuation metric is key to defining its market capitalisation, the company "has almost certainly been overcharged" fees by its investment adviser Hipgnosis Song Management, the board said in a statement.
Operative NAV has been recalculated at 85p ($1.0765) from the earlier 92.08p ($1.1657) it had stated on 4 March, it said. This previous NAV was the result of an independent valuation conducted by Shot Tower Capital, which cut the estimated fair market value of the portfolio by 21-31%.
The board of Hipgnosis has been carrying out a strategic review after shareholders rejected a planned sale by the previous board to investment manager Hipgnosis Song Management (HSM).
As part of the review, the board said it "raised concerns with the investment adviser on the double counting of accrued revenue in the calculation of the operative NAV, which results in an overstatement of the operative NAV", an issue it said has been raised previously.
Hipgnosis said the error was made in the calculations to get from its IFRS NAV to the operative NAV, which should deduct accrued income to avoid double counting.
HSM has since notified the board that they now agree with the view of the new board, which said it has reserved all the company's rights against HSM.
Shares in Hipgnosis fell 4% to 59.74p.