Hipgnosis is delaying the results due to doubts about the valuation
- Hipgnosis owns the back catalogs of artists such as Blondie and The Kaiser Chiefs
- The company was co-founded by Merck Mercuriadis and Chic guitarist Nile Rodgers
Founder: Hipgnosis was co-founded by former music manager Merck Mercuriadis
Hipgnosis Songs Fund has postponed the publication of its half-year results due to doubts about the true value of its assets.
The troubled investment company, which owns the back catalogs of musicians such as Blondie, Neil Young and The Kaiser Chiefs, was due to announce its financial results on Tuesday.
But it told investors that an independent appraiser had given the company a “materially higher” valuation than that implied by two recent transactions involving the sale of music rights.
Last week, Hipgnosis completed the sale of around 20,000 songs for $23.1 million (£18.4 million), at a 14.2 percent discount to their end-September valuation.
The company further referred to the proposed sale of $417.5 million in assets to the Hipgnosis Songs Fund, backed by alternative asset manager Blackstone, at a 24.3 percent discount to their value in March.
Shareholders voted against the deal at an extraordinary general meeting on October 26, where they also decided not to give the group a five-year mandate to operate as an investment trust.
Hipgnosis subsequently asked its investment advisor for advice on the independent appraiser's assessment.
“Hipgnosis Song Management Limited ultimately issued an advisory opinion, which was heavily cautious, leaving the board concerned about the valuation of the company's assets in the interim results,” the report said.
The FTSE 250 company, headquartered in London but registered in Guernsey, now expects to publish its half-year results by New Year's Eve.
The delay comes as there are doubts about the survival of the company, whose market capitalization has more than halved since April last year.
Hipgnosis has racked up significant debt by spending more than $2 billion acquiring the back catalogs of some of the world's most popular musicians, such as Shakira, Justin Timberlake and the Red Hot Chili Peppers.
Interest rate hikes have also weakened the appeal of music rights compared to other asset classes such as government bonds.
In mid-October, Hipgnosis told investors they would not receive dividends for at least six months due to the strain this would have placed on debt covenants.
The following month, co-founder Merck Mercuriadis faced legal action accusing him of “diverting business opportunities” from Hipgnosis Music Limited, a company he previously owned, to the Hipgnosis Songs Fund. Mercuriadis has denied the claims.
The Canadian started Hipgnosis with Chic guitarist Nile Rodgers in 2018 after a long career managing musicians ranging from Sir Elton John to Morrissey, Iron Maiden and Guns N' Roses.
Hipgnosis Songs Fund Shares were down 2.2 percent at 67.6 pence on Tuesday afternoon and have fallen by around 22 percent since the start of the year.