Hipgnosis, the London-listed company that purchased the music rights of Shakira and Neil Young among others, is facing the ire of investors after a chaotic year—and maybe a kind of palace coup.

According to documents filed Thursday from the investment fund’s latest AGM, shareholders chose to reject the company’s request for a new five-year mandate. Hipgnosis now has six months to reorganize or face being wound down.

Investors also voted down the proposed sale of 29 music catalogs, including songs from Shakira and Barry Manilow, to investment group Blackstone for $440 million. The deal, intended to shore up its share price, wasn’t beaten by other bidders during a 40-day road-show process, and several shareholders told the Financial Times that the $440 million price was significantly too low.

Sylvia Coleman, senior independent director of Hipgnosis, said: “While shareholders have not supported our proposed transaction or the continuation vote, it is clear that they share our belief in the inherent quality and potential of these assets. 

“The directors are now expediting the appointment of a new chair who will drive the strategic review we have already announced, with a clear focus on delivering improved shareholder value.”

In the buildup to the vote, the company was under pressure from major shareholder Asset Value Investors (AVI), which urged shareholders to reject the company’s latest proposals. It said there was a “staggering amount of trapped value” in Hipgnosis’s shares.

The group still plans to appoint a new chairman and report earnings results in December.

It’s the latest development in a whirlwind month for the once-promising songs fund.

The group told investors earlier in October that it was canceling plans to pay out an interim dividend after Citrin Cooperman, the company’s portfolio valuer, massively reduced expectations for past royalty payments.

Hipgnosis is expected to garner $9.9 million in royalties from its catalog between 2018 and 2022, down from an anticipated $21.7 million.

Investors also voted to push out Hipgnosis chairman Andrew Sutch. He had already opted to resign from his position in 2024.

Music assets lose their luster

Hipgnosis, started by CEO Merck Mercuriadis and Chic cofounder Nile Rodgers in 2018, shook up the music industry with an ambitious plan to buy famous artists’ back catalogs and sell the royalty rights to investors. The group makes most of its money from streaming.

The setup looked like the perfect marriage between musicians keen to cash in on their work for a lump sum, allowing investors a steady revenue stream as listeners topped up their coffers on platforms like Spotify and Apple Music. 

The investment fund received huge levels of investment as the fees artists demanded for their work soared. Catalog deals including a reported $200 billion from sister company Hipgnosis Songs Capital for Justin Bieber’s archive and a $150 million agreement for half of Neil Young’s portfolio soon followed.

However, rising interest rates have pushed up the discount rate used to value future assets, thus devaluing Hipgnosis’s portfolio. Higher rates have also made other asset classes, like government bonds, more attractive. 

Hipgnosis’s music catalog is valued at around $2.1 billion, per the company’s latest annual report. However, the company’s market value is now just £897 million ($1.1 billion). Shares in the company plunged in September last year after it tried to refinance a mountain of debt. The company is now worth 40% less than at its peak in November 2021.

While the picture for Hipgnosis looks bleak, investors still see value in the royalty-based asset class. In its letter to shareholders, AVI pointed to the strong performance of Round Hill Music Royalty Fund, which owns the rights to artists like Bruno Mars and Bonnie Tyler.

In September, the fund agreed to be bought by Los Angeles–based Alchemy Media for $469 million, a 67% premium on its stock price.