With its dividend on ice and major shareholders up in arms, it came as no surprise to see Hipgnosis Songs (SONG) lose its continuation vote on 26 October. But if investors voted pretty decisively against business as usual, it’s not so clear what the future might hold.
Firstly, let’s address one concern that has done the rounds in recent weeks. The failure of the vote simply means that the board must put forward “proposals for the reconstruction, reorganisation or winding up of the company” for shareholders within six months. What it doesn’t mean (as some might have feared) is that the board will automatically be forced to sell off the portfolio – even if this is an option.
Were the fund to continue its existence as a listed entity, one widely held belief is that there would be some big personnel changes. Recent weeks have already seen a shake-up of the board, with chairman Andrew Sutch and two non-executive directors departing, and many suspect the board could seek a different investment manager, too. As Numis put it in a recent note: “The failed continuation vote and the flawed process around the potential portfolio sales appear to show that investors have lost faith in the existing management team. If they had issues with a lack of governance from the board, it implies they have issues with what they were governing. As a result, it is difficult to see a long-term future with the current management.”