Hipgnosis: investment manager refuses to drop controversial call option

(Sharecast News) - The investment advisor to Hipgnosis Songs Fund has refused to drop a controversial call option, the troubled music rights owner confirmed on Tuesday. Hipgnosis Songs Management - which is run by HSF founder Merck Mercuriadis and majority owned by private equity firm Blackstone - has the right to purchase HSF's portfolio should its agreement with the fund be terminated.

The board believes the call option is deterring bidders. It therefore wants to amend the articles of the company to enshrine a payment of up to £20m to any prospective bidder, which would act as a form of "cost protection".

It has also called on Hipgnosis Songs Management to unconditionally remove the call option "in the best interests" of all shareholders.

But on Tuesday HSF said the request had been refused. Shareholders will therefore now vote on the proposed £20m payout at an extraordinary general meeting on 7 February.

HSF also confirmed it was launching an investigation into claims that 29 catalogues intended to be sold to Hipgnosis Songs Capital had been "cherry-picked". Hipgnosis Songs Capital is a fund managed by Hipgnosis Songs Management and majority owned by Blackstone.

HSF was thrown into turmoil last autumn when shareholders overwhelmingly rejected the $440m deal. They also voted against the firm continuing as a closed-ended investment company.

Since then, a new board has been incorporated and a strategic review launched.

HSF said on Tuesday: "The newly constituted board notes the statements made by two independent research reports, which asset that the 29 catalogues...were growing at materially higher rates to the overall portfolio and were therefore cherry picked for sale to Hipgnosis Songs Capital.

"The newly constituted board is investigating whether this is the case and if so, whether this was properly and fully disclosed to the previous board...and therefore whether the previous board were provided with the relevant information to enable them to make a decision in the best interests of shareholders."

As at 0930 GMT, shares in HSF were down 1% at 71.48p.

Mercuriadis, a former band manager, founded HSF in 2018.