Hipgnosis Songs Fund (HSF), its investment adviser, and founder Merck Mercuriadis are facing a lawsuit from the liquidators of Hipgnosis Music Limited (HML), a defunct company co-founded by Mercuriadis in 2015.

The lawsuit alleges that Mercuriadis diverted business opportunities from HML to newer Hipgnosis entities, with HSF allegedly assisting or receiving this diverted business. When HML wound up operations in 2018, it owed creditors approximately $4.54 million (£3.6 million).

Key details of the lawsuit:

• Filed in UK High Court
• Claims breach of fiduciary duty
• Names HSF, Blackstone-powered Hipgnosis Song Management (HSM), and Mercuriadis as defendants
• HSF is not insured for costs related to this claim

All defendants deny the allegations and plan to vigorously defend against them. This legal challenge comes at a challenging time for HSF, which is currently:

• Appointing a new auditor
• Conducting a strategic review (due by April 26, 2024)
• Facing shareholder concerns, with stock (LON: SONG) dropping 2.2% to 69 pence per share

The lawsuit's timing coincides with HSF's broader strategic review, which must conclude within six months of shareholders voting against the fund's continuation. Neither HML nor its liquidators have made public statements about the lawsuit at this time.

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