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How Hipgnosis Song Fund’s Accounting Practices Led to Big Problems at the Catalog Fund

Hipgnosis' accounting led to problems at the music catalog fund. Here's how it happened, according to a new report by Shot Tower Capital.

This week, an internal report made public by Hipgnosis Songs Fund, the London-listed company that played a major role in turning music rights into a stable, attractive asset class, confirmed what some analysts and shareholders had long suspected. At best, the 26-page report by Shot Tower Capital, the firm hired by the company’s board of directors in the wake of a shareholder revolt in October, details how the investment advisor, the Merck Mercuriadis-led Hipgnosis Song Management (HSM), made numerous missteps in accounting and financial projections of its vast music rights portfolio that includes music by Red Hot Chili Peppers, Shakira and Journey. But the report, part of the board of directors’ effort to regain shareholders’ trust, made clear that annual revenue was “materially” overstated and laid out numerous examples where the fund’s numbers didn’t reflect the reality behind its assets.

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