The row between the Hipgnosis Songs Fund and founder Merck Mercuriadis took another twist today, as the fund’s board says it’s investigating claims Mercuriadis “cherry picked” its best songs for a controversial attempted sale to another vehicle he manages.
Last year, the Hipgnosis fund aimed to sell $465 million worth of hits by artists including Shakira, the Kaiser Chiefs and Nelly to an unlisted fund, run by Mercuriadis' Hipgnosis Songs Management and owned by Blackstone.
At the time, the fund said its market value did not reflect the true worth of its assets.
However, two new research reports, published as part of a due diligence investigation that Hipgnosis launched into its own portfolio, claim the songs in question “were growing at materially higher rates to the overall portfolio and were therefore ‘cherry picked’”. The fund’s board is investigating those claims.
At the time the deal was announced, the fund's board said it had "put in place appropriate governance arrangements and information barriers".
After negative shareholder reaction, the fund tried to find another buyer for the songs in a “go-shop” process run by external bankers, but it didn’t get another similar bid. That may cast doubt on claims the songs were sold at a discount.
Analysts at JPMorgan said: "We are surprised that the new Board has chosen to disclose this information as, based on several factors, it looks hard to substantiate."
It comes as the fund continues to fight for its survival, after shareholders voted to wind it up, rejecting a vote to keep it alive soon after the asset sale was announced. The fund’s board, which has undergone major changes in recent months, can still save the investment vehicle if they can produce new proposals that gain the approval of shareholders. The board has previously mentioned it was considering plans to kick out Mercuriadis and find a new investment adviser.
Last week, the fund said it would pay £20 million to anyone who made a bid for its portfolio that the board recommended to shareholders. It said the payment was necessary to balance out a call option held by Mercuriadis.
