Hipgnosis Songs Fund (HSF), its investment adviser, and founder Merck Mercuriadis are facing a lawsuit from liquidators of the defunct Hipgnosis Music Limited (HML).

The lawsuit alleges that Mercuriadis diverted business opportunities from HML, where he previously served as director, to newer Hipgnosis entities. HSF is accused of unlawfully assisting with or receiving this alleged diversion.

Key Details:

• HML was founded in 2015 by Mercuriadis and Afram Gergeo
• Upon winding up in 2018, HML owed creditors approximately $4.54 million (£3.6 million)
• The lawsuit claims breach of fiduciary duty
• HSF, Blackstone-powered Hipgnosis Song Management (HSM), and Mercuriadis deny all claims

Financial Impact:

• HSF is not insured for costs related to this claim
• HSF stock (LON: SONG) dropped 2.2% to 69 pence per share
• The fund is currently undergoing a strategic review, due to conclude by April 26th, 2024

Mercuriadis, HSM, and HSF have stated they will "vigorously defend" against these claims. The fund is simultaneously working to appoint a new auditor while conducting its strategic review, which was prompted after shareholders voted against the fund's continuation.

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