Alan Ray
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Updated 07 Mar 2024
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This is not substantive investment research or a research recommendation, as it does not constitute substantive research or analysis. With this commentary, Kepler Partners LLP does not intend to influence your investment firm's behaviour. 

At Hipgnosis SONG's (SONG) AGM on 26/10/2023 shareholders voted against the continuation of the company, and also against the re-election of SONG's chair Andrew Sutch. At the EGM on the same day, shareholders did not approve a transaction involving the sale of certain assets at a discount to the last valuation to another investment fund managed by the same team that manages SONG. As a consequence, the SONG board began a process to bring forward alternative proposals for the future of the company. The first step towards this was the appointment on 07/11/2023 of a new chair, Robert Naylor, and non-executive director, Francis Keeling, both with relevant experience and most recently having both served on the board of Round Hill Music Royalty Fund, which in 2023 sold its entire portfolio and returned the proceeds to shareholders.

On 23/11/2023, SONG's board announced it would undertake a full strategic review, including independent due diligence on the portfolio with a third-party valuation exercise. The board also requested that the manager put forward alternative proposals for the future management of the company.

On 04/03/2024 the board of SONG announced the initial result of the third-party valuation exercise, and that because the result was material, the board decided to make an immediate announcement rather than waiting for the final due diligence report. The initial findings suggest a reduction in SONG's operative NAV from $1.7392 as at 30/09/2023 to $1.17, a c. 33% reduction. This is a provisional figure and does not include any adjustments for tax in the scenario where the portfolio was sold. As a result of this reduction, the board has determined that it will utitlise all of SONG's free cash flow for the purposes of reducing gearing, and thus will not pay dividends until further notice. The full due diligence report is expected on 25/03/2024 and the board anticipates updating shareholders shortly thereafter.

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