- Hipgnosis Songs Fund must find a new way forward after failing its continuation vote
- Options must be presented within six months
Shareholders in Hipgnosis Songs Fund (SONG) have overwhelmingly voted against its continuation, putting the embattled music royalties fund's future into question.
Some 82.3 per cent of shareholders voted against continuation at the trust’s annual general meeting this morning, according to those in attendance, with shareholders also decisively voting down controversial proposals to sell portfolio assets to finance share buybacks and the paying down of debt.
The sale of 29 song catalogues for $440mn (£356mn) announced earlier this year brought back concerns over the governance of the fund given the buyer was a separate private Hipgnosis vehicle also run by Merck Mercuriadis.
Hipgnosis confirmed the result of the extraordinary general meeting and said the board would now put forward proposals for the reconstruction, reorganisation or winding up of the company to shareholders within the next six months.
"These proposals may or may not involve winding up the company or liquidating all or part of the company's existing portfolio of investments," the board said.
Major investors have previously argued that voting against continuation need not translate into a wind up of the portfolio, with the possibility of the trust instead changing its investment management arrangements. "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," said Asset Value Investors executive director Tom Treanor before the vote.
The fund has been under pressure for quite some time on the back of poor performance but the situation has severely deteriorated in recent weeks, with major shareholders coming out against continuation and the board dropping an interim dividend to avoid breaching debt covenants.
The week leading up to the continuation vote alone has seen the trust initiate a strategic review, two directors quit the board and an announcement that the board failed to receive a superior offer for the assets it had considered selling.
