The Hipgnosis Songs Fund last week provided an update to its investors on the strategic review that is underway to inform the future direction of the publicly listed music rights-owning entity. It also confirmed that it is facing legal action from an earlier and now defunct Hipgnosis company, which was formally wound up in 2019 and is now in the hands of a liquidator.
On the review, the update confirmed that the Fund's board "intends to appoint independent advisers to conduct due diligence on the company's assets” to “provide a strong knowledge base from which the board will commence a process of identifying and bringing forward alternative proposals for the future of the company". It has also asked its advisor, Hipgnosis Song Management, to propose "alternative terms for their future investment advisory arrangements to the company".
The strategic review was first announced in October in a bid to allay the concerns of shareholders who were frustrated at the entity's low share price and, in some cases, were also critical of HSM. Both HSF and HSM were founded by Merck Mercuriadis.
At the time the board was anticipating a then imminent continuation vote, in which shareholders would decide whether or not HSF should continue in its current form. It was hoped the review and some other proposals would be enough to get investors to back continuation. But the vast majority did not. Which makes the strategic review all the more important.
Last week’s update also revealed more information about a legal battle that was previously alluded to in HSF's annual report back in July. A lawsuit has been filed by another now defunct Mercuriadis-founded company - Hipgnosis Music Limited - targeting Mercuriadis, HSM and HSF.
The liquidators of Hipgnosis Music Limited have alleged that, prior to the winding up of that company, there was a “diversion of business opportunity” to HSF and HSM, ie an opportunity that should have been pursued by Hipgnosis Music Limited was taken up by the other Hipgnosis entities. It’s alleged that HSF “unlawfully assisted Mr Mercuriadis with, or received, this alleged diversion”.
Unsurprisingly, Mercuriadis, HSF and HSM “deny such claims and intend to vigorously defend them”.