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Second time lucky for music investor Hipgnosis Songs Fund?
It has been a year since Hipgnosis Songs Fund first announced its intention to float on London’s Main Market. After a failed attempt to float last summer the trust is back again with a lower profile listing.
The investment trust, which wants to take advantage of
a shift from CDs to music streaming, aims to raise £200m at 100p per share when it becomes a public company on 11 July under the ticker SONG.
Hipgnosis says it will make attractive returns through its catalogues of songs from award-winning songwriters.
It will be advised by Hipgnosis Songs, which was founded by Merck Mercuriadis, former manager of well-known artists such as Beyoncé, Guns N’ Roses and Elton John.
Hipgnosis aims to acquire 100% of a songwriter’s copyright, including the writer’s share, the publisher’s share and their performance rights.
Whenever a song from the catalogue is made in a physical or digital format, streamed online or performed live on TV or radio, the company receives royalties.
This also applies if a song is broadcast on TV or radio and when a song is used in a film, TV show, video game or advertisement, providing a wide range of potential revenue sources.
Investors could enjoy a potential 5% annual dividend yield once the portfolio is fully invested although notably this is lower than the original 6.5% target announced back in June 2017. The advisory fee has also been cut from 1.5% to 1%.
In sum, Hipgnosis is aiming for 10% or more in total net asset value (NAV) returns every year over the medium term and expects to pay its first dividend in November.
DOES ANYONE ELSE DO THE SAME THING?
The investment trust is the first on the Main Market to offer exposure to music intellectual property rights, although there is a small cap firm that operates in a broadly similar area, One Media IP (OMIP:AIM).
With a market cap of approximately £10m, One Media IP acquires and repackages nostalgic music for the likes of Spotify.
Risks for Hipgnosis include its reliance on the provision of services by third party service providers, which could impact its performance if one of these providers fails to deliver.
Investors should take a close look at the prospectus before they consider investing. Given the unusual nature of this investment vehicle we will be waiting for it to establish a track record before considering an investment in the shares. (LMJ)