Merck Mercuriadis could cease being involved with the publicly traded song fund that he founded, according to reports. Photo Credit: Brian De Groodt
Against the backdrop of ongoing investor criticism, stock-price struggles, and a quick-approaching continuation vote, Hipgnosis Songs Fund (LON: SONG) is reportedly attempting to eject its founder and most widely known executive, Merck Mercuriadis.
This newest consideration in the well-documented operational woes of Hipgnosis Songs Fund was just recently emphasized in a Guardian piece, with other noteworthy details highlighted in UK-based publications including the Times.
We’ve covered the publicly traded entity’s latest hurdles in detail this week, after execs on Monday nixed a planned dividend, citing an adjustment in calculations related to retroactive-royalty payments.
Said dividend had been set to arrive at about the same time as two particularly high-stakes votes for Hipgnosis: One to sell 29 catalogs to Blackstone-powered Hipgnosis Songs Capital (with the proceeds expected to pay down debt and buy back shares), the other to keep on operating as an investment fund into at least early 2026.
Though stakeholders (several of whom have commented on the subjects in the media) appeared skeptical of the catalogs sale, it initially seemed that they were leaning towards supporting Hipgnosis Songs Fund’s continuation vote – if only to prevent its valuable music IP from being liquidated at a potentially steep discount.
But HSF shares plummeted to a record low in the wake of the dividend disaster, and with investor confidence presumably shaken as a result, Hipgnosis Songs Fund yesterday launched a “strategic review” that will ostensibly look to optimize shareholder value with “a review of the future management arrangements” and more.
As part of the latter, Hipgnosis Songs Fund disclosed that it had “appointed an executive search firm” to find a replacement for chairman Andrew Sutch “at the earliest opportunity.” As of late September, Sutch had been poised to step down “once a suitable replacement is found and, in any event, at or before the Company’s annual general meeting in 2024.”
And as mentioned at the outset, the management review might set in motion more than Sutch’s expedited departure, as some outlets are reporting that Merck Mercuriadis is battling to stay in power.
Long the face not only of Hipgnosis but recent years’ music-IP valuation boom – which has brought with it a number of deep-pocketed investors – Mercuriadis doubles as CEO of HSF’s “investment adviser,” Hipgnosis Song Management (HSM). Like the above-noted Hipgnosis Songs Capital, HSM is powered by Blackstone. (His daughter Rosa serves as HSM’s chief creative, marketing, and culture officer.)
Upon detailing the strategic review, HSF relayed that it’d weighed terminating the underlying investment adviser agreement – with the previously described Blackstone- and Mercuriadis-owned business, that is. However, doing so without having another adviser approved by lenders beforehand would constitute an “event of default” under its current credit facility, according to the company.
Additionally, the Fund also indicated that it’d attempted to axe a component of the investment adviser agreement enabling said adviser “to acquire the Company’s portfolio on termination of its contract.” Of course, HSM went ahead and opted against consenting to the pivot – thereby leaving the door open to scooping up the song rights at hand.
While time will tell whether Mercuriadis ceases to be involved with Hipgnosis Songs Fund, it goes without saying that recent months’ – and days’ – developments are less than ideal.
The previously noted investor votes are slated to take place at a pair of meetings next Thursday, and significantly, certain top-10 shareholders are now signaling that they won’t vote in favor of HSF’s continuation despite the strategic review.
“‘I can’t think of anyone worse qualified to hold a strategic review than this board,’” Asset Value Investors executive director Tom Treanor spelled out when speaking with the Times, further describing the review as “‘desperate stuff.’”
Lastly, Jefferies analysts have reportedly described the review as “‘a last-ditch and ultimately unsuccessful attempt to sway shareholders.’” During today’s trading hours, HSF stock turned in a roughly two percent improvement, finishing at 77.5 pence (currently $0.94) per share.
