Hipgnosis Songs fund shares decline continues in share buyback

Despite beginning a long-awaited share buyback program about three weeks ago, Hipgnosis Songs Fund (LON:SONG) has a market capitalization of around £1.04 billion (currently $1.18 billion) – well below the value assigned to its catalog of songs earlier in 2022.

At market close today, Hipgnosis shares were worth GBX 85.20 each, or 89 cents at the current exchange rate. The figure reflects a slight decline from Thursday’s close, but an improvement from the record low of GBX 77.20 that SONG hit last month.

Additionally, the old value represents a decrease of nearly 32% since the start of 2022 and, as initially reported, signifies a market capitalization of $1.18 billion. Although some finance professionals have questioned the fundamentals of Hipgnosis’ valuation methodology in the past, the company’s seemingly independent third-party valuator previously pegged a price tag of around $2.5 billion. to the rights of the current song.

That said, one of the issues with this appraiser’s valuation is the lack of consideration of interest rates, which have risen significantly since Hipgnosis joined in 2018.

According an evaluation from FinancialTimesif said appraiser (who is said to be involved in about three quarters of the industry’s catalog contracts) “were to start using higher interest rates in its calculations – reflecting rising real rates – the valuation of tens of Thousands of songs would drop, which could wreak havoc for investors who used the debt for purchases.

Bearing this point in mind, Stifel analysts said in a note after Hipgnosis unveiled its share buyback plans: “This is a surprising announcement for us. Indeed, the fund will borrow at just under 6% to buy back shares…the market is essentially indicating a lack of credibility on valuations.

Needless to say, it will be worth the Hipgnosis Songs Fund’s path forward throughout 2022, especially since executives haven’t specified exactly how many shares they’ll be holding. intend to redeem.

The global share buyback program, however, is expected to end on Thursday, December 8, and some analysts have recognized the possibility that Blackstone will ultimately repurchase the publicly traded deal at a significant discount.

October 2021 saw Blackstone take a stake in Hipgnosis Song Management, which serves as an “investment advisor” at the Hipgnosis Songs Fund and has himself bought several catalogs in 2022. The Fund, for its part, has not acquired new song rights in over a year due to a maxed-out line of credit.

Finally, at the beginning of October 2022, Hipgnosis refinance your debtand some analysts voiced relatively bullish positions on SONG soon after.

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