Pressure is mounting on Beyoncé’s former manager as he tries to convince shareholders that he is still hitting the right note with the song fund he founded.
The Hipgnosis Songs Fund – which Merck Mercuriadis founded in 2018 – offers investors the opportunity to make money from royalties on songs by famous artists.
But on Monday the company’s shares fell to a record low after the company canceled its dividend, suggesting that profits in the US would not be as lucrative as it had hoped.
The Hipgnosis Songs Fund is now preparing for a special shareholder vote next week that will decide the company’s fate and whether the board can go through with a controversial catalog sale to Blackstone fund Hipgnosis Songs Capital (HSC). which is also operated by Mercuriadis.
The Hipgnosis Songs Fund hopes to convince investors that the deal to offload 29 music catalogs worth around £362 million will boost the company’s battered share price and reduce its mountain of debt, which has become a perennial issue in times of high interest rates is.
Hit the right note? The Hipgnosis Songs Fund was co-founded by chic funk guitarist Nile Rodgers
But the sale of about a fifth of the fund’s music – including hits by Shakira and Rick James – is causing a stir.
Asset Value Investors, which holds a 5 percent stake in Hipgnosis Song Fund, this week urged shareholders to reject the “terrible” deal when they vote next Thursday.
Asset Value’s Tom Treanor pointed to the “non-competitive nature” of the bidding process and warned that the price was too low and provided very little value to shareholders.
She also called for a shakeup of the company’s board and a rejection of the so-called “continuation vote” that shareholders were asked to take.
Sachin Saggar, an analyst at investment bank Stifel, said the deal with Blackstone “opened a can of worms” for bosses because the price was “significantly below what we would have expected”.
“The problem with the proposed sale is the price and the fact that it is being sold to a related party where there are obvious questions about conflicts of interest,” he said.
Mercuriadis, 60, is managing director and founder of Hipgnosis Songs Fund and holds a minority stake in buyer Hipgnosis Songs Capital, which is backed by Blackstone.
The Mail understands at least one other major shareholder plans to publish a public letter ahead of next week’s meeting urging other investors to reject the deal.
The Guernsey-based investment company founded by Mercuriadis and chic funk guitarist Nile Rodgers quickly conquered the music scene.
The Hipgnosis Songs Fund, which now owns the rights to 65,000 songs, first made a name for itself by buying up the music of some of the world’s best-known artists, from the Kaiser Chiefs to Neil Young and Blondie.
And because the company chose to go public on the London market, where the company is based, it ended up being included in the FTSE 250 in 2020.
But the company failed to maintain that momentum, and investors grew increasingly dissatisfied with its returns – especially as Mercuriadis’ own social media life continued to appear lavish.
In the last year alone, shares have fallen by more than a fifth – and even by 28 percent since the Blackstone deal was announced. Shares rose 3 per cent, or 2p, to 69p yesterday.
But there were also other problems at the top.
The fund said this month it had suspended a top executive after allegations of historic sexual assault and harassment.
Hipgnosis Songs Fund has placed Kenny MacPherson, managing director of the company’s publishing division, on leave as he faces a lawsuit in California. MacPherson denies all allegations made against him.
A senior music industry source told the Mail that the Hipgnosis Songs Fund seemed like a “house of cards waiting to fall”.
“The company has spent a lot of money on catalogs that don’t work,” they said, explaining how high interest rates made that mountain of debt increasingly problematic for Mercuriadis and his team.