Hipgnosis boss laments declining share price

Hipgnosis boss Merck Mercuriadis has said he shares investors’ disappointment with the trust’s share price performance after a challenging year.

Since its launch four years ago by Mercuriadis and Chic frontman Nile Rodgers, Hipgnosis has acquired the rights to tens of thousands of songs by well-known musicians.

The portfolio now includes 146 catalogs, totaling 65,413 issues, with a total fair value of $2.67 billion, according to the latest results.

The confidence may be a hit with musicians looking to monetize their back catalogs, but the stock price has plummeted nearly 30 percent over the past six months as investor interest waned.

“I share shareholders’ disappointment that the true value of our iconic songs is not reflected in the current share price,” Mercuriadis said.

“Hipgnosis is an asset-based company with an unparalleled catalog due to its extraordinary success and cultural significance.”

Hipgnosis shares were up 2.74 per cent at lunchtime to 82.2 pence, but have lost almost 35 per cent so far.

Mercuriadis said: “The current share price implies that our company is valued at a discount rate of 12 percent, which presents an incredible investment opportunity as this is a deep discount compared to multiples currently being paid in the market.”

Despite a “very challenging environment,” the trust’s operating NAV per share remained largely flat, falling from $1.8491 to $1.8312 in the six months to the end of September.

In sterling terms, it was up 16 percent from 140.79p in March to 164.06p in September.

The trust also announced an operating net asset value of 149.82 pence on Dec. 6, which is a 47 percent discount to yesterday’s closing price.

Jason Hollands, Managing Director of Bestinvest said: “Like many investment firms offering exposure to alternative asset classes, Hipgnosis is currently at a very sharp discount to its reported net asset value of approximately -45 percent.

This reflects weak investor sentiment, especially towards more niche and esoteric investments, but also the impact of rising bond yields on how investors value future cash flows from royalty income in today’s money. the discount.’

The actual numbers of the interim results released today appear slightly better than analysts’ expectations in terms of streaming revenue, but the NAV has been more or less flat. The hefty discount to NAV and high dividend yield of 6.6 percent will entice income seekers looking for diversification outside of equities, but keep in mind that this is pretty high gearing.”

Pro-forma annual sales, which represent royalty income earned from the catalogs in the portfolio, rose 4.2 percent over the six months, with catalogs older than 10 years up 7.7 percent.

Mercuriadis said: “In the wider music market, people continue to listen to and pay for music regardless of current cost-of-living challenges, with annual audio streams in the US surpassing the one trillion mark for the first time, despite a full month of the year remaining. .

“Paid for streaming continues to grow, there are now more than 523 million premium paying subscribers worldwide. Apple Music has passed the $9.99 price point in major markets, and 2022 saw a full return to live music.

“These are all exciting indicators of the continued growth we will experience as revenue flows through the collections process to Hipgnosis.”