This article was last updated on October 27, 2023
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Songs from Iconic Artists up for Auction
From “Under The Bridge” by Red Hot Chili Peppers, “Heart of Gold” by Neil Young, “Call Me” by Blondie to “Whenever, Wherever” by Shakira. The rights to these world-famous pop songs could easily go to the highest bidder within six months.
The owner of all these songs, the listed music investment fund Hipgnosis Songs, is in serious conflict with its own shareholders. They want to sell all of the more than 65,000 songs from the fund’s collection, if necessary, within six months to see enough of their investment back.
Popular Music Investment Fund Faces Challenges
Hipgnosis was founded several years ago by former Chic bassist Nile Rodgers and Merck Mercuriadis, once manager of artists and bands such as Elton John, Guns N’ Roses, Iron Maiden, and Beyoncé. The duo started buying up portfolios of music rights from artists at breakneck speed. For example, two years ago Neil Young sold all his songs to the fund for $150 million. Justin Bieber’s songs were acquired for just over $200 million.
The listed Hipgnosis now owns 146 music collections from bands and artists containing 65,413 songs, including 163 songs that once won a Grammy Award. The books list the value of the entire collection at $2.32 billion.
However, investors in the fund have become frustrated in recent months. The expected higher revenues from music streaming platforms such as Spotify, which have to pay royalties to music rights holders, have not materialized. As a result, the profit distribution is not growing as hoped.
The high acquisition costs have depleted Hipgnosis’ cash reserves, and the increased interest rates make refinancing expensive. The cancellation of a dividend payment this month added further disappointment. Consequently, the share price of Hipgnosis halved last year.
Restructuring or Closure?
The board of Hipgnosis announced plans to sell 29 of the 146 music portfolios to investor Blackstone. However, shareholders rejected the proposal due to dissatisfaction with the alleged low sales price.
Instead, almost 85 percent of shareholders voted in favor of a proposal that requires the fund to present concrete proposals within six months to restructure, reorganize, or potentially close down Hipgnosis.
Implications for Artists and Songs
If Hipgnosis were to close down, the entire collection of over 65,000 songs would be put up for auction, allowing the proceeds to be distributed among all shareholders. This means that songs from the fund, including those from the Peppers, Neil Young, and Shakira, could potentially change hands.
In a statement, Hipgnosis board member Sylvia Coleman assured that there will be a “clear focus to create improved shareholder value.” Following the shareholders’ meeting, the share of the music investment fund recovered on the London Stock Exchange, with a 2.3 percent increase.