- A major shareholder urges undecided investors not to back the trust in its continuation vote
- They believe the trust has a "bright future", dependent on a reset
Hipgnosis Songs (SONG) seemed at even greater risk of failing an impending continuation vote after the trust was forced to scrap its interim dividend and a major shareholder came out against it on the same day.
SONG shareholders have their say on the trust's future on 26 October via a continuation vote and a separate ballot required to approve a proposed disposal of assets to finance share buybacks and the paying down of debt.
The measures outlined in mid-September and the prospect of continuation have already elicited some mixed responses, but the trust came under further pressure on 16 October.
The board first announced that it had ditched an interim dividend to avoid breaching a debt covenant after a valuation specialist lowered its expectations of certain royalty payments for the portfolio.
The situation intensified on the same day, with Asset Value Investors, manager of the £1.1bn AVI Global investment trust (AGT) and a SONG investor to the tune of a 5 per cent stake, publishing an open letter urging other shareholders to join it in voting against continuation.
AVI executive director Tom Treanor said investors should not assume that voting against continuation would automatically result in a fire sale of SONG's assets.
"Over the course of the last several weeks we have spoken with a majority of the share register," he wrote.
"Not one of those shareholders is in favour of an immediate sale of the portfolio, yet we believe many will vote against continuation. We urge undecided shareholders not to be swayed by a misleading narrative that a failure to pass the continuation resolution results in the wind-up of the company or a fire sale of assets."
He added that the company had a "bright future", potentially with the current investment manager on revised terms.
