Proactive Investors - Hipgnosis Songs Fund Limited (LON:SONG) shareholder Metage Capital has written a letter to other investors that recommends voting against three current directors of the music rights investment trust.
The public letter, seen by Proactive, is the second in a week from major shareholders and follows Monday’s dividend cut and yesterday's announcement by the board that a strategic review has been launched.
Metage said it has "run out of patience with the ongoing turmoil at the company", citing a "series of self-inflicted wounds" in recent years including an inadvertent breach of leverage limits, the dissolution of subsidiaries whilst holding rights and the current proposed £440 million asset sale to Blackstone (NYSE:BX), for which a shareholder vote is due to take place next Thursday, alongside a continuation vote and an annual general meeting.
"It is time for a clean break," Metage said, saying it has voted against directors Andrew Sutch, Andrew Wilkinson and Paul Burger, and called for "a genuine consultation" with the shareholders over who should replace them.
As the clock ticks towards the critical vote on 26 October, shareholder unrest is palpable, with a letter from 5% shareholder AVI earlier in the week claiming that major shareholders were not in favour of the immediate sale of assets.
Yesterday SONG's board announced a strategic review and confessed they had considered – but opted against – ending the contract with their current investment advisor, Hipgnosis Songs Management, which it should be noted is majority owned by Blackstone.
On the asset sale, Metage highlighted that there had been no up-to-date valuation provided to shareholders, and that even though the board argued there was insufficient time to get an updated valuation, the circular on Thursday revealed that the lenders to the company had received “a valuation by Virtu Global Advisors, LLC showing...the fair market value of the first disposal assets”.
Analyst Sachin Saggar at Stifel said this element of the Metage letter "caught our eye" and noted a preference for Virtu Global as a valuation agent, but that it "seems unusual that the lenders requested this and not the board/manager".
But, more positively, the analyst said the lender has "ensured the sale of assets are at fair market value based on a valuation agent that we have confidence in".
"So this indicates that the sales price is broadly fair and not materially undervalued as suggested by many investors we have spoken to over the past few weeks. However, we assume that the valuation from Virtu Global was based on the headline sales price of $440m and is not adjusted for leakage."
Overall, Saggar said he does not think this changes anything around voting intentions and "if investors wish to remove the manager, they will have to vote against continuation", with the assets having "plenty of interest from third parties" if an open sale was conducted.