Hipgnosis management shake-up after row with Songs fund board

Merck Mercuriadis is stepping down as CEO of the Hipgnosis Songs Fund investment adviser as the dispute with the trust’s board continues.

The former music executive will become chairman of Hipgnosis Songs Management, which manages HSF’s assets, including the back catalogs of some of the world’s biggest musicians.

Mercuriadis will be replaced by chief operating officer Ben Katovsky, who said he hopes to “work constructively” with the music rights fund for the benefit of shareholders.

The fund is currently conducting a strategic review that could lead to sale, reorganization or even dissolution within six months.

About a fortnight ago, Hipgnosis stated that it would offer any potential buyer up to £20 million as ‘cost protection’ to acquire the entire catalogue.

This raises concerns that HSM’s ‘call option’, which gives the right to buy the fund’s music portfolio, would seriously reduce the value of the assets and cause investors to suffer large losses.

Furthermore, HSF believes that the call option represents a conflict of interest between its shareholders and the investment advisor.

Katovsky said: “I believe HSM is best placed to create value for their shareholders, whether they decide the company has a future as a long-term operation or want to pursue asset sales.”

HSM said Katovsky would be in charge of the company’s “executive management” and implement the company’s growth strategy.

At the same time, Mercuriadis will be responsible for acquisitions, working with songwriters, artists and the music industry and increasing the value of HSM’s customer portfolios.

The Canadian founded the Hipgnosis Songs Fund in 2018 with Chic guitarist Nile Rodgers after a career managing artists such as Sir Elton John, Iron Maiden, Morrissey and Guns ‘N’ Roses.

He said: ‘Having invested nearly $3 billion in extremely successful songs on behalf of our clients, we are at an important crossroads in our development where the services we provide to our clients are of paramount importance.’

Hipgnosis Songs Fund has racked up massive debt by buying up the catalogs of dozens of musicians, including Blondie, Shakira, the Red Hot Chili Peppers and Fleetwood Mac’s Christine McVie and Lindsey Buckingham.

This led to its value plummeting as successive interest rate hikes by the Bank of England reduced the attractiveness of music rights compared to other asset classes such as bonds.

To try to reduce debt and finance a share buyback, Hipgnosis last year agreed to sell around a fifth of its music portfolio for £372 million to funds advised by Blackstone, the world’s largest asset manager.

But in late October, investors voted against both the deal and allowing the company to continue as an investment fund.

Hipgnosis Songs Fund Shares were 0.75 percent lower at 66.5p early Friday afternoon.