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Hipgnosis Songs Fund enjoyed a good run as a media darling, with warm coverage of its ambition to make songs a lucrative asset class for investment. 2022 has been tougher for the company though, with attention focusing more on its falling share price and lack of recent deals.

In its latest half-year report yesterday, Hipgnosis set out the case for its continued value. “In a very challenging environment, I’m proud that in our work to establish Songs as an asset class, everything we have told our investors from IPO has either become reality as stated or been exceeded,” said founder Merck Mercuriadis in his introduction.

The report does show the big challenge for Hipgnosis at the moment. Its ‘operative NAV’ [net asset value – how much its music catalogues are worth in total] is pegged at $2.22bn, yet its market cap (the valuation of the business itself, based on its share price) is just $1bn.

“Yes, [the] share price doesn’t reflect value, yes the discount is unacceptable, but we’re going to fix those problems,” said Mercuriadis during a presentation attended by the Financial Times yesterday.

The report highlighted the brighter spots for Hipgnosis’s business: its revenues grew by 7.5% year-on-year to $91.7m in it last fiscal half-year period, which ran to the end of September. Within that, streaming royalties for its catalogues grew by 15.8% to $23.6m, while sync revenues were up 32% to $9.8m.

“Despite our successes, I share the disappointment of Shareholders that the true value of our iconic Songs is not reflected in today’s share price,” wrote Mercuriadis in the report.

“As Songs are a new asset class, we understand that the market has concerns about both valuation and discount rate, particularly when our NAV is stable in a macroeconomic environment in which the value of many other assets are declining.”

Hipgnosis needs to restore the confidence of that market in order to get the company’s share price back up, which in turn will enable it potentially to raise more money and buy more catalogues. That macroeconomic environment cited by Mercuriadis will, however, continue to be a challenge.

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