A second investment company deriving an uncorrelated income stream from music royalties is set to list in London next month, forcing the acquisitive Hipgnosis Songs (SONG ) to share the stage.
Round Hill Music, a New York-based publisher, is aiming to raise $375m (£288m) for an investment trust listing in London with an initial public offer (IPO) next month.
The fund has an investment pipeline of 120,000 songs from 40 catalogues, including classic hits by The Beatles, Rolling Stones and Celine Dion. It will target a 4.5% dividend yield, contributing to an annual total return envisaged to be between 9% and 11%.
Round Hill was set up in 2010 by Josh Gruss, a former Bear Stearns banker who had also worked at Sony Music and Atlantic Records. As well as investing in revenue-generating song rights, the company has arms focused on royalty collection and placing songs in ads, films, TV and games, as well as its own record label.
Having already invested in golden oldies like Louis Armstrong’s ‘What a Wonderful World’ and several early Beatles numbers, in 2018 it completed the acquisition of Carlin Music Publishing, owner of Elvis Presley’s back catalogue.
When a possible flotation was first reported in August, analysts at stockbroker Stifel noted the company had been buying up songs for a decade, making this an ‘experienced team with a proven track-record’.
‘Additionally, they focus on older vintage songs which will give their portfolios a lower risk-profile relative to Hipgnosis. If Round Hill’s IPO is indeed successful it could provide interesting competition for Hipgnosis and in the process could improve previous concerns around the fund’s transparency and catalogue vintage,’ wrote analysts Max Haycock and Sachin Saggar.
Since launching in July 2018, Hipgnosis has swelled to over £1bn in size, across its ordinary and C shares. The brainchild of former Beyoncé manager and industry veteran Merck Mercuriadis, the royalties fund has proved a hit with investors for promising a stream of steady income unconnected to wider market moves – a thesis that Mercuriadis says has been proven during the coronavirus pandemic.
While the Guernsey-based investment company has invested in a host of pop classics, including a recent purchase of The Pretenders’ Chrissie Hynde’s back catalogue, it has also paid up for more recent hits by the likes of Stormzy and Ed Sheeran. Analysts also believe the acquisition of Big Hill Music last month could help Hipgnosis manage its portfolio more actively, through placing songs and more efficient revenue collection.
Investment Trust Insider understands that the Round Hill trust’s ‘Intention to Float’ document, detailing key information, will be published by the end of the week. Stockbroker Cenkos Securities is acting as the sole bookrunner on the IPO.
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