It seems like only yesterday that Hipgnosis Songs Fund, or SONG, announced that it was going to sell a stack of music rights from one Hipgnosis fund to another in an effort to boost its flagging share price. Shares had been languishing somewhere around 80p, a far cry from the heady days of November 2021 when - during peak music rights investment fever - the share price tipped over 129p.
Little did we know back then, in September 2023, that this was the first move in a battle that would see months of high-stakes drama. Shareholders quickly moved to block that deal, and almost simultaneously SONG announced that it had miscalculated how much money it was due as part of a Copyright Royalty Board ruling. Within the space of a couple of weeks, SONG instituted a ‘strategic review’ to try and get things back on track, saw two of its directors quit, and shareholders voted to fire the fund’s then chair, Andrew Sutch - who had already said he would resign.
That same shareholder meeting led to the Hipgnosis-to-Hipgnosis rights sale being put on hold, and saw investors vote against a continuation of the fund. A new chair - Round Hill Music’s former head, Robert Naylor - was quickly appointed, who told shareholders that he would be bringing in independent experts to carry out due diligence on the song rights that formed the fund’s assets. The fund then delayed its financial results because of concerns over earlier valuations applied to those assets and warned its investors that it should take various numbers previously published with a generous pinch of salt.
Things only got worse from there. The fund’s valuer Citrin Cooperman quit and the SONG share-price plunged to 52.9p, only to drop even further when the board issued a statement warning investors that there had been an “error” which included “double counting” and “overstatement” of revenues.
At the start of April, the new valuation expert, Shot Tower Capital, released its report which alleged excessive spending, poor systems, missing documents and misleading statements on the part of SONG’s advisor, Hipgnosis Song Management, led by veteran artist manager and Hipgnosis founder Merck Mercuriadis.
A couple of weeks later, Concord said that it would happily pay $1.16 per share to buy up SONG - only to be reminded that Mercuriadis and Blackstone, his partners in HSM, held a ‘call option’ - dubbed by some the “FO clause” - which meant that if Concord wanted to get rid of HSM after they’d acquired SONG, they’d need to pay off HSM to the tune of twenty million quid. Blackstone then made its own offer for SONG, and hinted that if it didn’t get its way that theoretical call option might become a very real problem.
Concord doubled down, upping its price to $1.25 a share, which Blackstone countered at $1.30, knocking Concord out of the race, and sealing the deal. Until a group of hedge funds came knocking, and asked Blackstone whether it really wanted to gamble on them blocking the deal. Blackstone found another $12 million, upping its price to $1.31 as a sweetener to being allowed to do its deal as a ‘scheme of arrangement’, which would allow it to squeeze out any minority shareholders, so long as it could get agreement from 75% of any shareholders who turned up at a meeting or sent in a proxy vote in favour.
Everything went quiet - before Blackstone issued a statement letting everyone know that there was no more money and its most recent offer was its ‘best and final’ in a seeming attempt to stop hedge funds betting that they might be able to squeeze yet more money from the deal.
Hedge funds continued to gamble on the outcome, with increasingly large stakes in SONG being amassed by a number of funds, with a significant proportion of the shares ending up controlled by a small number of hedge funds, looking for arbitrage opportunities - heavily leveraged trades on the spread between a share’s current price and the amount paid in a takeover.
Legal documents filed by Lyra BidCo - Blackstone’s acquisition vehicle - showed that meeting scheduled to take place at 10am yesterday, at the Bow Churchyard offices of august city lawfirm Shoosmiths, with a regulatory news service announcement of the results to be published later in the day.
That meeting happened, and then… tumbleweed. No regulatory news service announcement, no comment from any of the various PR firms. Just silence.
The markets closed - still no announcement. “Expect something shortly” said one spokesperson. Still nothing. “We’ll call you back shortly”, said another, “we just need to confirm something”. Still no announcement.
No update as the markets opened this morning and then, finally, nearly 24 hours after the vote took place, the announcement was published, and the vote had gone through, with 99.97% of the shareholders who voted approving the deal.
“Overwhelmingly passed” said the press release, skipping over the fact that only 59.21% of the total shares had voted one way or the other.
Why the delay? No one associated with the various parties involved in the transaction was willing to comment, but one city insider hinted that there may have been an “issue of clarity” at the meeting.
Why the low turnout, when so many hedge funds were so engaged in ensuring that the vote went through and their arbitrage trades paid off? Again, no one was able to confirm, with one spokesperson simply saying that the turnout was “not unusual”.
Could the issue that caused the late regulatory announcement be related to a seemingly low turnout? Will the court now approve the scheme of arrangement and allow the deal to close? If it was any other company, the answer would almost certainly be “yes”. But as one city source told CMU this morning, “with Hipgnosis, almost anything is possible”.