In the latest setback for investors in music royalty fund Hipgnosis Songs Fund (SONG) the company has announced it will not pay a dividend until its new financial year starts on 1 April 2024 (6 November).

The move is being taken to preserve cash after October’s shareholder vote against a $440 million deal to sell the firm’s 29 catalogues (to Hipgnosis Songs Capital – a partnership between the investment manager and Blackstone) and against the current structure of the trust – with the result it has to deliver a reorganisation or wind up within six months.

Shares in Hipgnosis, which owns the rights to tracks from artists like Shakira and Neil Young, have fallen more than 40% over the last two years. According to the AIC (Association of Investment Companies) the trust is trading at a 52.7% discount to NAV (net asset value).

In an attempt to steady the ship, new chair Robert Naylor has been appointed. Naylor replaces Andrew Sutch after his failure to gain re-election. The music royalty investment trust has also appointed a new non-executive director Francis Keeling with immediate effect.

Significantly both Naylor and Keeling were on the board at rival music royalty play Round Hill Music which was recently acquired by Alchemy Copyrights for $468.8 million. Naylor served as chair and Keeling as a non-exec.

Ewan Lovett-Turner director and head of companies’ research at Numis says: ‘the new chair will have to fully understand the views of shareholders to help establish the best way forward’.

Lovett-Turner observes that shareholders views would have ‘evolved’ and ‘refocused’ after the failed vote and change in the board.

He adds: ‘We expect investors will be happy with the appointments given they oversaw the sale of Round Hill Music Royalty at a price level most investors appeared happy and swiftly got it off an investor list of “problem children” they had to explain to their underlying investors. We expect that they can add significant value in using the playbook from Round Hill, in stabilising expenses and giving greater comfort on accounting and valuations.

‘However, we still expect it may be a trickier process to obtain a clean resolution, given onerous termination terms with the management group, and the company being close against debt covenants.’

What will be key, is achieving ‘shareholder value’ if there is to be a sale of assets. Lovett-Turner says: ‘Assessing value is difficult given investors are rightly sceptical of the net asset value, with concerns over the price paid for investments and the impact of higher interest rates on current valuations.’

Disclaimer: The author (Sabuhi Gard) owns shares in Hipgnosis Songs Fund.

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