Financially-interested watchers of the music business will know all about Spotify‘s recent flotation on the New York Stock Exchange – and its eye-catching NYSE ticker, SPOT.
Over in London, however, there’s about to be another successful flotation in music, complete with another attention-grabbing fiscal ticker – SONG.
Hipgnosis Songs Fund Ltd, the vehicle set up by veteran artist manager Merck Mercuriadis, has successfully raised over £200m ($262m), MBW has learned – and will now IPO on the London Stock Exchange (LSE) in the coming weeks.
The company today (June 29) told investors that it had exceeded its target of raising gross proceeds of £200m due to excess demand.
It is now anticipated that the company will be the biggest IPO of the year on the LSE, and the only publicly-listed pureplay music company on the exchange.
What’s Hipgnosis Songs Fund Ltd going to spend the money on? Music, of course.
In a recently filed, updated prospectus, the company noted that it intended to ‘manage the songs it acquires with the objective of constructing a high quality and diversified portfolio’.
It will identify these songs through its ‘Investment Adviser’ – which is, essentially, Mercuriadis – plus an Advisory Board made up of people well-known in music biz circles.
These advisers, MBW has learned, include funk legend Nile Rodgers, as well as US-based artist manager Ian Montone and Lava Records founder Jason Flom.
Mercuriadis’s other advisers include attorney William Leibowitz – the founding partner of Roberts, Leibowitz and Hafitz – as well as Bjorn Lindvall, an experienced banker with a background at Credit Suisse and Morgan Stanley, amongst others.
“The Investment adviser believes an opportunity currently exists to acquire catalogues at attractive valuations, where pricing is determined by reference to historical income.”
Mercuriadis is apparently ‘undertaking due diligence on, or is in advanced discussions… to acquire, eight catalogues’, and believes that there is enough market opportunity for the £200m proceeds to be deployed within 12 months.
The prospectus adds: ‘Through [Mercuriadis and his advisory board’s] extensive relationships in the music industry, a pipeline of catalogues has been identified which the company believes are not available to all potential purchasers.
“The catalogues contain proven, evergreen songs from award-winning songwriters which are well-suited to the company’s investment strategy.”
It continues: ‘The Investment adviser believes an opportunity currently exists to acquire catalogues at attractive valuations, where pricing is determined by reference to historical income (which does not yet reflect streaming growth over the last 12 months) and not future forecast revenues.’
In addition to his previous investment in the company, Mercuriadis is stumping up £100,000 of his own money to purchase shares in the fund ahead of the IPO.
The exec anticipates that, in addition to growth from the increased size of streaming payouts, sync exploitation will be a lucrative area.
“[This] team is expected to include key synchronisation managers and publishing experts currently working at Universal Music Group, Sony Records, Warner Chappell and PRS for Music.”
The prospectus reveals: “Mr Mercuriadis is assembling an experienced team of initially eight individuals to act as the Company’s synch managers with experience and strong relationships in the media community… [this] team is expected to include key synchronisation managers and publishing experts currently working at Universal Music Group, Sony Records, Warner Chappell and PRS for Music.”
An initial plan to float Hipgnosis Songs in the UK was scrapped 12 months ago. Evidently, times have changed. N+1 Singer, a City broker, has been hired to work on the IPO.
Over the course of 30 years in the music business, Mercuriadis has managed the likes of Elton John, Nile Rodgers, Iron Maiden, Guns N’ Roses, Morrissey and Beyoncé.
He is a former CEO of Sanctuary Group, which was sold to Universal Music Group in 2007 for £44.5m ($88m).
Merck Mercuriadis pictured at FastForward 2017 with Ellie Giles of Various Artists Management, credit: Amanda Rose PhotographyMusic Business Worldwide