Hipgnosis considers management shake-up ahead of crunch vote on future

Hipgnosis, which owns the rights to the back catalogues of musicians including Justin Bieber, Shakira and 50 Cent, said it will be considering all options for the future of the company with the aim of returning more cash to shareholders.

That could include changing the management team, which could lead to the replacement of its founder and chief executive Merck Mercuriadis.

It comes after the firm earlier this week said it had decided to scrap its shareholder dividend pay-out, which could otherwise have seen it breach the terms of its loan agreements.

It led its share price to plunge to an all-time low during the day after slashing its earnings forecast.

The business had been impacted by a US ruling affecting royalties paid to songwriters or rights-holders for music streamed between 2018 and 2022, which it said means the firm will receive “significantly lower” payments.

Nile Rodgers of Chic and Mr Mercuriadis launched the fund on the London Stock Exchange in 2018.

Mr Mercuriadis has built up a large catalogue of songs since setting up the fund, but earlier this year it agreed a deal to sell 29 music catalogues for 440 million US dollars (£362 million) as it said shares were undervalued.

Mr Mercuriadis is the chief executive of Hipgnosis Songs Management (HSM), which advises the fund.

The board of Hipgnosis said it was also considering serving notice to axe its agreement with HSM, which advises on the fund’s portfolio of songs. But it said it had decided it would not currently be in shareholders’ interests to do so.

Hipgnosis said its strategic review comes ahead of a key vote next Thursday where shareholders will be asked to approve the continuation of the fund for another five years.

It is urging investors to vote in favour of its continuation.

Meetings with shareholders have “highlighted a continued belief in the company’s portfolio and growth prospects” as well as a need for a leadership shake-up, the firm said.

It added that the strategic view will not involve the consideration of any offer for the company.

A spokesman on behalf of HSM, the investment adviser to the Hipgnosis fund, said: “We fully recognise that the board needs to act as they see fit.

“We continue to believe that HSM is uniquely positioned to deliver value to Hipgnosis Songs Fund shareholders as a result of our deep relationship with the songwriters that make up the catalogue and our song management expertise.

The spokesman added: "We intend to continue to demonstrate this through our actions.”