<\/p>\n
\n\tHipgnosis Songs Fund capped off an eventful 2023 by lowering the value of its music catalog amidst internal conflict over exactly what the company\u2019s star-studded catalog is worth. <\/p>\n
\n\tThe publicly listed royalty fund said its operative net asset value per share declined 9.2% to $1.74 on Sept. 30 from $1.92 on March 31, according to its half-year earnings report on Thursday (Dec. 21). The sharp decline stemmed primarily from a \u201cmaterial reduction\u201d in expectations for CRB III and CRB IV income.<\/p>\n
\n\tThe company\u2019s self-reported valuation has long exceeded the value implied by its share price and estimates of equity analysts. In recent months, Hipgnosis Songs Fund has proposed and completed partial catalog sales at discounts to their net asset values.<\/p>\n
\n\tNew board chair Robert Naylor<\/strong>\u2018s statement to investors described a strained relationship with the fund\u2019s investment advisor, the Merck Mercuriadis<\/strong>-led Hipgnosis Song Management, over the valuation of the five-year-old company\u2019s catalog that includes stakes in songs by Neil Young<\/a>, Journey<\/a> and Fleetwood Mac<\/a>. <\/p>\n \n\tTwo days earlier, the board postponed<\/a> the release of half-year earnings after the investment advisor produced a \u201cheavily caveated\u201d opinion on the catalog valuation provided by independent firm Citrin Cooperman that was \u201cmaterially higher than the valuation implied by proposed and recent transactions in the sector.\u201d<\/p>\n \n\tInternal conflicts continued while the results were delayed. According to Naylor, the board\u2019s request of Hipgnosis Song Management about \u201cthe matter to be published on the Company\u2019s website in order to provide transparency for shareholders\u201d was rebuffed \u201cunder the confidentiality clauses of the Investment Advisory Agreement.\u201d<\/p>\n \n\tOn Thursday, Naylor urged Hipgnosis Songs Management to provide an opinion on the valuation of Hipgnosis Songs Fund \u201cwithout caveats\u201d to provide greater transparency to shareholders. In the absence of a caveat-free opinion, the board urged investors to use \u201ca higher degree of caution and less certainty\u201d than normal when considering its fair value and operative NAV.<\/p>\n \n\tHipgnosis Songs Fund shares fell 1% to 0.70 GBP on Thursday.<\/p>\n \n\tGross revenue from continuing operations declined 26.9% to $63.2 million from $86.4 million in the six-month period ended March 31, 2023.<\/p>\n \n\tNet revenue from continuing operations declined 29.7% to $54 million from $76.8 million. About half of the decline came from a $11.9 million reversal of accrued royalties in October. Excluding those accrued revenues, net revenue grew 14% to $65.8 million.<\/p>\n \n\tPro-forma annual revenue (PFAR), which measures gross royalties received and excludes revenue accruals, grew 10.4% to $64.9 million.<\/p>\n