Two weeks ago, FT Alphaville took a look at Hipgnosis Songs Fund — a £1bn UK-listed closed-end investment vehicle that has spent the best part of the last three years raising and spending cash to buy song catalogues.

Founded and run by Merck Mercuriadis, who once managed names such as Elton John, the business promises to transform songwriting royalties into juicy dividend payments for its investors, uncorrelated with traditional asset classes.

The fund has stood out in particular due to the rapid nature of its growth: acquisitions are seemingly announced every week, often with few financial disclosures. This has raised questions about the prices Hipgnosis is paying for the song catalogues, and whether the deals can support the cash flow investors are expecting will line their pockets in the future.

Yet, a lack of transparency is a trend that seems to have continued this Thursday morning. From the FT’s excellent Nic Fildes:

Hipgnosis, the acquisitive music publishing company, has set a price for an issue of new shares to raise an unspecified amount that it has earmarked for new deals within three months of getting the money . . . 

 . . . The company said it would issue new shares at a price of 121p to fuel more purchases but declined to say how much it intended to raise. It said it would spend the money it raised via the placing within three months of the new shares being admitted, having noted in December that there was a “pipeline” of acquisition opportunities with a value of £1bn

A share placing with no specific total in mind to buy an unspecified set of song catalogues? Hmmm.

Look, Hipgnosis Songs Fund’s financial piping might be gushing cash but the issue is, we simply don’t know at the moment. New song catalogues, fuelled by fresh equity issuance, bring in new cash flows, meaning it’s hard to get a handle on the fund’s steady-state economics at the moment. Whether this will change in the future, either through more granular financial disclosures or simple a slowdown in its Pac-Man-esque acquisition policy, remains to be seen.

However, with the shares hovering around the fund’s last stated net asset value, the market seems convinced for the moment.

Related Links:
Hipgnosis issues new shares to fuel music rights buying spree — FT
Stifel is worried that Hipgnosis Songs Fund is slipping out of tune — FT Alphaville

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