Hipgnosis Songs Fund Limited has released an update on the preliminary valuation report prepared by Shot Tower Capital as part of the Strategic Review. The Board recommended that investors use the Fair Value and the Operative NAV with a higher degree of caution and less certainty due to material discounts in the market. Shot Tower Capital was appointed to provide an independent valuation of the Company's assets, conducting a detailed review of the portfolio and estimating the fair market value between $1.80 billion and $2.06 billion.
The valuation was based on various factors and assumptions, including royalty income streams, rights administration, and vintage stability. Shot Tower Valuation reflects a multiple of 15.9x net royalty income prior to deducting contingent catalogue bonuses and a reduction in valuation of 26.3% compared to the valuation as at 30 September 2023. The Pro-Forma Operative NAV per share was estimated to be 0.92 pence per Ordinary Share, not including potential corporation tax charges.
Due to the decrease in Operative NAV, the Board intends to use the Company's free cashflow to pay down debt and does not plan to recommence paying dividends for the foreseeable future. Shot Tower is expected to present its final due diligence findings to the Board by March 25, 2024, with the Board providing a further update on the complete findings by March 29, 2024.
Robert Naylor, Chairman of Hipgnosis Songs Fund, stated, "The newly constituted Board is making good progress with the due diligence work that will underpin its strategic review. We are disclosing the valuation at this time given its material difference to valuations previously disclosed. The Board will provide further detail on this when the due diligence is complete. The Board remains focused on identifying all options to deliver shareholder value."