The Hipgnosis Songs Fund (HSF) presented its shareholders on Thursday, September 14, with a proposal to sell 29 catalogs from its portfolio for $440 million to the group’s other fund, which handled the Pink Floyd songbook a year ago: Hipgnosis Songs Capital. (Hsc), a private fund backed by Blackstone.
Both sides of the transaction are represented by separate teams under each fund’s joint investment management company, Hipgnosis Song Management (HSM).
In a note sent to investors, the Hipgnosis Songs Fund does not hide one of the main motives for the deal: Hipgnosis Songs Capital, which will act as a “catalyst for the revaluation of shares” of the Hipgnosis Songs Fund.
This revaluation, Hipgnosis founder Merck Mercuriadis explained in an internal memo today, will be achieved by Hsf using the proceeds from the deal to pay off $250 million of debt currently drawn on Hsf’s revolving credit facility and acquire $180 million of its own shares. through buyback.
“As you know,” said Mercuriadis, “due to global macroeconomic conditions, the UK markets are going through a very difficult period, with most investment funds trading at a deep discount.
Among them is also the Hipgnosis Songs Fund, which, despite having just achieved its best ever performance on a like-for-like basis, was trading at a significant discount to the fundamental value of the songs we invested in.
Stock buybacks then become “one of the methods companies use to return value to shareholders, and companies that do it expect it to cause stock prices to rise. This is how stocks are “overvalued,” Mercuriadis added.
The 29 catalogs Hipgnosis Song Management is offering to sell from Hsf to Hsc include royalties/income streams from songwriters such as Poo Bear, Ari Levine, Joel Little, Shakira (Ansah pictured), Barry Manilow and Rick James.