Six years ago, Hipgnosis, a company led by outspoken music executive Merck Mercuriadis, started buying up the song catalogs of artists like Neil Young, Shakira, Justin Bieber and the Red Hot Chili Peppers, sparking a new wave of deals in the music industry.
Mercuriadis, who previously managed Beyonce and Elton John, is stepping down following a tumultuous year that saw the music company's assets sold to private equity giant Blackstone after a shareholder revolt, an accounting scandal and a bidding war.
Within the company's complex structure, the Hipgnosis Songs Fund is an “investment trust” that is listed on the London Stock Exchange and holds the rights to tens of thousands of songs. A separate company run by Mercuriadis, Hipgnosis Song Management, is the “investment adviser” to the company, and does much of the trading and management of those songs. In 2021, Blackstone invested $1 billion, taking majority control of the adviser firm.
The board of directors of Hipgnosis Songs Fund voted Monday to accept Blackstone's $1.6 billion acquisition offer for the company's assets, the company announced early Tuesday.
After going public in 2018, Hipgnosis got off to a strong start, investing heavily in artists' music rights that eventually grossed more than $2 billion and made a headline-grabbing pitch to investors that royalties from pop songs were “more valuable than gold or oil.”
Mercuriadis also regularly attacked the conglomerates that dominate the music industry, portraying them as owning too much content to properly manage. Industry insiders have privately complained that Hipgnosis was paying too much for its catalog and that prices were inflated across the board. Midia, which studies digital media and the music industry, estimates that music industry catalog deals will total $5.3 billion in 2021 alone, much of it in deals with individual artists.
“People see songs as inanimate objects, but I don't think that's the case,” Mercuriadis told The New York Times in an interview in 2020. “I think songs are a great force that moves the world, and they deserve to be managed with the same level of responsibility as people.”
But by last year, investors in the Hipgnosis Songs Fund had become frustrated by the fact that the company's stock price was trading well below a third-party estimate of its asset value.
In October, shareholders voted against keeping the company in existence, triggering a series of changes that led to a 26 percent drop in the value of the company's assets following a critical review by new financial advisers. The report also found that Hipgnosis Song Management had overpaid for large parts of its catalog and inflated the fund's revenues and profits.
In April, the Hipgnosis Songs Fund reached a tentative agreement to sell its assets to Concord, a major American independent music company whose portfolio includes labels Fantasy, Rounder and Loma Vista, for $1.4 billion. However, a bidding war ensued with Blackstone, which won the bid at $1.31 per share.
Last week, Mercuriadis announced he would be leaving Hipgnosis Song Management once Blackstone's acquisition of his entire catalogue was complete.
“This is an opportunity for me to strategically shift my focus,” he said in a statement, “and spend more time advocating for songwriters so they are properly compensated for their work.”