Hipgnosis Songs (SONG), the royalties fund that owns the rights to 13,000 tunes including Amy Winehouse hit Back to Black, looks to raise over £200m in a share issue aimed at institutional and private investors.
Hipgnosis Songs (SONG ), the royalties fund that owns the rights to 13,000 tunes including Amy Winehouse (pictured) hit Back to Black, is looking to raise over £200m in a new share issue aimed at both institutional and private investors.
In a two-pronged attack, the 4%-yielding £714m alternative income fund is offering to place up to £200m of C-shares with City investors.
Private investors, who often complain of being frozen out from corporate share sales, can also invest on the same terms through a separate C-share issue on PrimaryBid. This is a new technology platform backed by the London Stock Exchange that was launched to encourage greater access to corporate fund raisings, such as the recent £2bn share issue from catering group Compass (CPG) in the coronavirus crisis.
Merck Mercuriadis (pictured), the former Beyonce manager and boss of the Sanctuary UK record label who floated Hipgnosis on the stock exchange two years ago, said: ‘To date we have been backed with over $1bn in investments by more than 50 of the most reputable institutional investors in the world. This is the first time we have put focus to the retail sector having become not only a FTSE 250 company but also the 58th biggest yielder in the index. We are delighted to be working with Primary Bid on this.’
The C-shares, so called because they convert to ordinary shares once the money behind them has been invested, will be priced at 100p.
Under the European prospectus directive individual investors can be allocated up to €8m (£7.2m) or 20% of the shares offered to institutional investors.
The retail offer opened yesterday and requires a minimum investment of £100. It will close on 10 July or earlier if there is high demand.
PrimaryBid is free for investors to use as it charges companies a fee for fund raising through its platform.
Hipgnosis has grown swiftly through share issues after tapping into investor demand for income that is not correlated to mainstream stock markets or the wider economy.
Last month the Guernsey investment company, which owns 54 song catalogues, said it was in discussions over a pipeline of further catalogues worth £1bn.
The new C-shares will be eligible for dividends from the royalty income received on the songs they buy but will not be entitled to the quarterly payouts paid on the existing ordinary shares until after they convert, such as the interim dividend declared by Hipgnosis today for the April-June quarter.
Stifel analysts Max Haycock and Sachin Saggar expected Hipgnosis would deploy new capital quickly and hoped it would include catalogues of older songs whose revenues were more stable.
‘Investors may find it easier and cheaper (on a discount basis) to buy the Ord shares in the market instead, with the benefit of a higher dividend yield than the ‘C’s,’ they commented.
Hipgnosis ordinary shares are up 1.2p or 1% to 117.2p today on a 0.5% premium above their operative net asset value of 116.7p. They launched at 100p in July 2018 and started this year at 109p before plunging to 87.5p at the depth of the coronavirus crash in March before rallying.
In a full-year trading statement in June the company said NAV had grown 17.7% in the 12 months to 31 March. It said performance this year had been boosted by a surge in people downloading songs on streaming services such as Spotify during the pandemic lockdowns.
A ruling from the US Copyright Royalty Board to rise songwriter pay from streaming services by at least 44% also helped.
In a statement Mercuriadis said: ‘This capital raise provides us with the opportunity to continue growing our portfolio of culturally important proven hit songs, which currently offer significant value.’
The annual results for the year to 31 March are due later today.