The Hipgnosis Songs Fund - or SONG - is on the lookout for someone new to help it work out the value of its music catalogues. This follows the not-so-surprising news that Citrin Cooperman - the firm that’s been doing that work so far - has quit.
According to the Times, Citrin Cooperman - and its music rights specialist Barry Massarsky, a former economist at US collecting society ASCAP - had "long valued Hipgnosis’s portfolio", but gave notice on 20 Dec that it "would not be providing future valuation services to Hipgnosis Songs Fund Limited”.
That’s not a huge surprise given recent - and very public - criticism of Citrin Cooperman’s valuation by the new SONG board.
That criticism came in the form of a statement issued in December last year in which the board announced that they would be delaying publication of the fund’s annual financial statements. A key part of the delay was concerns that the valuation calculated by Citrin Cooperman was “materially higher than the valuation implied by proposed and recent transactions in the sector”.
When the delayed financial results were subsequently published later in December, the board said they were "aware of multiple data points and transactions within the market which are at material discounts to the implied fair value of the company’s assets".
That statement went on to say that "the board recommends that investors use the fair value and the operative NAV with a higher degree of caution and less certainty than might otherwise be attached to it as an accurate reflection of the fair value of the company’s assets".
Although that language seems fairly restrained, had they said “we don’t think these numbers are particularly reliable and you probably shouldn’t either”, it would not have been much more scathing. As a result, the fact Citrin Cooperman has now quit is not much of a surprise.
All of this is - of course - part of the wider falling out between SONG and its investment advisor Hipgnosis Song Management. That dispute is fast becoming a very compelling - and very public - drama.
As SONG investors became increasingly unhappy last year, the fund kicked off a strategic review of its previous operations. Shortly after that, a new board was put in place at an AGM in October which is now following through on the strategic review.
A core part of that review is the relationship between SONG and HSM which has resulted in an escalating war of words between the two entities.
Indeed, at the same time as it raised its concerns about Citrin Cooperman's valuation of the SONG catalogues in December, SONG also dissed HSM. The other Hipgnosis company had, it said, initially declined to respond to its concerns about the valuation and had eventually "provided an opinion which was heavily caveated".
SONG went on to say, "in the absence of further evidence or insight from the investment adviser on which to base a judgement on the valuation of the company’s assets, the board has concerns as to whether the fair value is reasonable".
Translated out of city-speak, that might be something like “we don’t trust the numbers, you shouldn’t either, and even the folk who commissioned them don’t think much of them”.
A spokesperson for SONG has confirmed that it has now “begun a formal process to appoint a new independent valuer for its year-end report and accounts. The new valuer will advise the board on an ongoing basis".
"The board remains focused on the strategic review", the spokesperson added, "under which it is looking at all options to deliver shareholder value".