Hipgnosis Songs Fund has published its latest annual report this morning, including an introduction by founder Merck Mercuriadis addressing the share-price decline that has left the company worth less than the value of its song assets.
“The current share price does not reflect the success of our investment strategy and I know all Shareholders share my frustration and disappointment that this is the case,” wrote Mercuriadis, who cited “a world of incredible turmoil following a global pandemic, the largest war in Europe in nearly 80 years and increasing inflation and interest rates” as factors in a loss of investor confidence.
“However, despite these unique macroeconomic conditions, the strong growth in paid consumption for music continues. The Music industry is rapidly growing and thriving while others contract and as a result, Song catalogues continue to be a highly attractive asset,” claimed Mercuriadis, promising an update in the near future on “a number of options to enhance Shareholder value”.
(Yesterday we reported on how some of those shareholders are keen for Hipgnosis to sell some of its catalogues, which may be one of the options now being explored.)
As for the results, Hipnosis generated net revenues (its revenue minus royalty costs) of $147.2m in its last financial year, which ended on 31 March 2023. That’s down 12.5% from $168.3m in the previous year. The company’s annual net losses after tax grew sharply from $19.4m to $89.6m over that period.
Hipgnosis said that the decline was due to “a number of non-recurring elements” and said that if they were stripped out, its net revenue actually grew 10.9% year-on-year.
We will see how the markets react to the results over the course of today, but looming on the near-horizon is also a ‘Continuation Vote‘ by shareholders, where they will decide whether Hipgnosis Songs Fund should continue to exist, or sell its assets and return the cash to shareholders.
When Mercuriadis and his team pitch those “number of options to enhance Shareholder value” ahead of the vote, it will be of truly existential importance for the fund.