Business

Hipgnosis Plans Billion-Plus Shares to Raise Funds for More Catalogs

London
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A view over the City of London Skyline at twilight on March 18, 2019 in London.

Hipgnosis Songs Fund Limited is planning to issue up to 1.5 billion new shares as it eyes more catalog acquisitions, according to a company prospectus released on Thursday (Jan. 21). The London-based firm has initial plans to issue up to 500 million shares beginning Feb. 10 at £1.21 apiece, which could potentially raise up to £605 million ($827 million) on the London Stock Exchange, where it has traded since 2018.

The potential proceeds of this and further planned share issuances appear to already be spoken for.

Hipgnosis' investment advisor, The Family (Music) Limited, has a "pipeline catalog" currently under due diligence or late-stage discussions at a combined purchase price of over £1 billion, the filing reveals.

Deal flow has never been a problem for Hipgnosis, having already raised over £1 billion for catalog acquisitions. Even with competition from Primary Wave, Concord Music Group and Round Hill Music, The Family (Music) Limited has secured 129 catalogs with 60,836 songs -- 3,164 of them former No. 1 hits. Already this year Hipgnosis has announced its acquisitions of rights of producers Jimmy Iovine and Bob Rock, Colombian singer Shakira and rock legends Neil Young and Lindsey Buckingham. As of Sept. 30, 2020, the Hipgnosis song catalog was valued at £1.16 billion ($1.59 billion).

As a publishing investor, Hipgnosis is in the right place at the right time. Streaming service growth is expected  to drive gains in recorded music and publishing revenues through the decade; Goldman Sachs forecasts there will be 1.15 billion subscriptions and $45 billion in recorded music revenues by 2030. Publishing rights, a relatively safe investment with little to no correlation to broader market changes, are especially attractive when low interest rates have caused investors to embrace alternative asset classes like royalties.

Hipgnosis' filing makes clear the pandemic is squeezing publishers. Lockdowns and closures have reduced the number of establishments — bars, restaurants, gyms, retail stores —  paying performance royalties. And radio stations that pay a share of revenues to PROs will pay less when advertising falls. Hipgnosis has lowered its expectations for revenue accruals by 25%. Even so, raising more money for catalog acquisitions is unlikely to be a problem. With the majority of its catalog aged ten years or younger, Hipgnosis' assets will far outlive COVID-19's grip on the global economy.