Hipgnosis Song Management Says It’ll Nix the Controversial ‘Call Option’ — In a New ‘Multi-Year’ Investment Advisory Deal

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Hipgnosis Song Management (HSM), the Merck Mercuriadis-led and Blackstone-powered “investment adviser” to the publicly traded Hipgnosis Songs Fund (HSF), says it’s offered to drop a controversial part of the companies’ agreement in connection with discussions on a new multi-year contract.

HSM just recently emphasized its purported willingness to nix the clause in question, a “call option” of sorts, via a formal release. Back in October, HSF investors voted against the continuation of the songs fund in its present form, and there’s now a late-April deadline for its revamped board to propose a reorganization plan.

One plausible outcome, it’s been clear from the get-go, is the sale of Hipgnosis Songs Fund’s assets, including the rights to all manner of well-known works. But the aforementioned call option, which HSF investors have for some time lamented, would enable HSM to swoop in and buy the IP upon the end of the investment advisory agreement.

Last week, HSF’s board teed up a special resolution that would, in brief, allow for sizable payments to prospective catalog purchasers – thereby encouraging (at least in theory) possible buyers unaffiliated with HSM to come to the table.

“[HSM’s Call Option] not only acts as a structural conflict between the interests of our shareholders and the Investment Adviser,” HSF chair Robert Naylor spelled out at the time, “but also creates a significant deterrent to potential bidders for the Company’s assets thereby depressing the value of the Company.”

And it’s against this backdrop that Hipgnosis Song Management says it’s all for doing away with the call option – provided the concession sets the stage for a new investment advisory deal.

“In order to remove any confusion,” HSM penned, “Hipgnosis Song Management confirms that it verbally communicated to the Board [of Hipgnosis Songs Fund] in December 2023 it was willing to concede the Call Option as part of a negotiation for a new multi-year Investment Advisory Agreement.

“This was formalised in a written proposal that was delivered to the Board on 16 January 2024 and re-affirmed in further written correspondence on 17 January 2024. This position reflects Hipgnosis Songs Management’s [sic] desire to remain the Investment Adviser to the Company and work constructively and collaboratively with the Board to maximise shareholder value,” the business concluded.

(The ongoing misspelling of Hipgnosis Song Management in official company documents, including some penned by HSF as well, is perhaps the most readily available testament to the convoluted nature of Hipgnosis. Unlike Hipgnosis Songs Fund, HSM takes the singular for its middle word.)

Of course, that HSF investors voted overwhelmingly against the fund’s continuation, as mentioned, suggests they’d prefer not to retain HSM as investment adviser at all. As highlighted, though, nixing the deal at once would seemingly trigger the call option.

Meanwhile, the dates attached to recent events suggest that the two Hipgnosis operations remain far from striking a new pact and putting their differences in the rearview.

Assuming HSM did in fact tell HSF’s board on the 17th of its willingness to shelve the call option in a fresh contract, that would mean the publicly traded songs fund unveiled the above-said special resolution the very next day. The point is worth keeping front of mind in the approaching weeks and months, which appear quite likely to see the dispute intensify.