Shareholders of Hipgnosis, a fund that invests in music royalties, have overwhelmingly rejected its current structure, raising doubts about the future of the group that manages song rights.
During a special meeting on Thursday, 83.2% of investors voted to reject the proposal for the investment trust to continue operating for another five years.
This indicates that the publicly traded company based in London, which allows investors to profit from the royalties of songs by popular artists like Beyoncé and Neil Young, must now reconstruct its board and suggest other options within the next six months or risk being dissolved.
The Extraordinary General Meeting (EGM) took place right after the company’s yearly meeting, during which shareholders rejected a $440 million sale of music catalogs. As a consequence, the previously arranged deal to sell 29 catalogs to a partnership between the company’s investment advisor and funds advised by Blackstone will not move forward.
The group’s chair, Andrew Sutch, was removed from his position even though he had previously stated his plan to resign at the group’s AGM next year. However, shareholders intervened and voted to remove him immediately.
Sylvia Coleman, the director in charge of overseeing the board independently, stated: “The board and the investment advisor have both extensively communicated with investors in the past few months. Although shareholders did not approve our proposed deal or the vote for continuation, it is evident that they also believe in the inherent value and potential of these assets.”
The board is currently accelerating the selection of a new leader who will lead the planned evaluation, prioritizing the enhancement of shareholder value.
On the day preceding Thursday’s Annual General Meeting, it was declared that Andrew Wilkinson and Paul Burger had stepped down from their roles as non-executive directors of the company. This recent update follows Hipgnosis’ decision to cancel its dividend payment and reduce its projected income from royalties earlier this month.
An outside evaluator has significantly lowered its evaluation of the company’s portfolio following a ruling from the US Copyright Royalty Board to adjust the industry’s royalty payments.
Due to this, Citrin Cooperman, the evaluator, reduced the anticipated royalties that Hipgnosis Songs Fund will receive for tracks played between 2018 and 2022. This includes songs by Blondie, Barry Manilow, Red Hot Chili Peppers, and Shakira. The amount was decreased from $21.7 million (£17.9 million) to $9.9 million.
The corporation stated that it was unable to provide the interim dividend due to potential violation of agreements with lenders for its revolving credit facility. Hipgnosis receives royalties for each play of the numerous songs it holds rights to.
In 2018, Merck Mercuriadis, a former manager for musical acts like Elton John, Iron Maiden, Guns N’ Roses, and Beyoncé, founded a company that was once highly successful. Mercuriadis is now an advisor to the business. The company, called Hipgnosis, has spent a significant amount of money purchasing music catalogues in an attempt to profit from assets it believed were not being properly valued in the age of streaming.
It was uncertain what would happen to Mercuriadis and his position as advisor for the group after the votes on Thursday.