Shares in music royalty fund Round Hill Music Royalty Fund (RHM) jumped 63% as it agreed a $1.15 cash offer from Alchemy Copyrights – a premium of 67% to Thursday’s closing share price of $0.69.

Alchemy Copyrights, trading as Concord, buys music rights and companies with previous transactions spanning recorded music, music publishing and theatrical rights.

The cash offer values the fund at $468.8 million and is a discount of approximately 11.5% to the music royalty investment firm’s economic net asset value (NAV) per share of $1.30 as of 8 September.

Robert Naylor, chairman of Round Hill Music Royalty Fund said: ‘The board is pleased to present this opportunity for liquidity at a premium to both the share price and the IPO price, as well as at a narrow discount to economic net asset value per share. The recommended offer represents excellent value for shareholders.’

RELIEF FOR INVESTORS

Russ Mould, investment director at AJ Bell, said: ‘Round Hill Music Royalty Fund floated on the stock market close to the peak of the hype in music investments. Its share price traded sideways for a year and a half, and then went into freefall as interest rates shot up.

‘It has now received a takeover offer at a hefty premium to last night’s closing market price. Shareholders could get out at a price higher than the shares have ever traded since listing. That is a relief to them, but hardly chimes with the expectations for the company at the time of its listing in 2020.’

ALL EYES ON HIPGNOSIS

After the Round Hill offer, investors may be wondering who’s next in line for a takeover in the sector.

Shares in Hipgnosis Songs Fund (SONG) reacted positively to the news, rising 12% to 89p in morning trading.

It has not been an easy ride for Hipgnosis, with the music royalty investment firm seeing its share price fall nearly 20% over the past year as investors have gradually ‘fallen out of love’ with some of their more ‘blue sky’ stock choices post-pandemic.

Hipgnosis shares hit 11-month low on Neil Young / Spotify spat

Stifel analyst Sachin Saggar commented: ‘We were expecting Hipgnosis to be the first to announce some detail over a possible transaction, such as a return of capital. In fact, this announcement helps highlight there is significant value in the Hipgnosis portfolio also.

‘The investment funds sector is currently suffering from exceptionally wide discounts to NAVs on funds investing in 'non-equity' assets. We expect further mergers and acquisitions (M&A) activity, which will highlight that there is currently a lot of value in many funds and pessimism has gone too far.’

LEARN MORE ABOUT HIPGNOSIS

DISCLAIMER: Financial services company AJ Bell referenced in this article owns Shares magazine. The author of this article (Sabuhi Gard) owns shares in Hipgnosis Songs Fund and AJ Bell. The editor (Ian Conway) own shares in AJ Bell.

 

---