I’ve been talking about Hipgnosis for a while — the songs fund which went on a spending spree over the last few years buying everything from Blondie’s catalogue, Ed Sheeran’s, Hasley’s, Shawn Mendes — the list goes on. They went on a spending spree — think Pretty Women meets a budget fulled by low interest rates (btw – wake up babe, new Mauboussin paper just dropped — “Investment in the era of “Easy Money”. Essential read). They overpaid for almost everything — which is typical for the era of easy money; SoftBank overpaid for a whole load of stuff and was saved by Arm (just like they were saved by Alibaba earlier on — when they swing, they swing big). Tiger Global paid a lot too. Everyone did! It was the thing — it was what was happening; it was what was going on; it was what was hip, dude. Anyway I have written about the valuation gap in Hipgnosis’ portfolio before and — this will come as no surprise — an independent valuer, Shot Tower Capital, estimates a midpoint valuation of the portfolio to be more like $1.9bn (that’s a 26% reduction from the previous valuation in Sept 2023). Shot Tower has been involved in some of the biggest deals of the last decade — untangling Michael Jackson’s estate, as well as Prince’s. They know what they’re doing.
Valuation gives the portfolio an NAV of 92p — we actually wrote (and substantiated) that we value the portfolio to be worth about 90p (link) — nice to know we’re ahead of the curve and our music valuation abilities are similar to the far more experienced Shot Tower (Lorde, ever want to sell your rights and grab a green juice? Call me). Anyway; we’ve already said that and at the time Hipgnosis was trading at 73p. News of the revaluation plunged the stock from 62p to about 53p (it’s since rebounded to 60p — during the pullback we took the chance to add to our position — not financial advice — in our model portfolio). Obviously Hipgnosis is a fairly risky game to play — hence why I am telling you — if you do this, you did it on your own accord — as the immortal Latin phrase goes — “caveat emptor”.
Why do I think the train wreck that is Hipgnosis is interesting? It’s got all the things going wrong for it — it overpaid, it’s got debt, and it just suspended its dividend (remember the New Zealand Rural Land company also suspended their dividend and recently reinstated it — best way to get access to NZ farmland — pure-play. Don’t cry for me Argentina — divvys aren’t everything).
It’s a cigar butt. That’s why I like it (as the philosopher Cardi B once said — “I said I like it like that”; as the Backstreet Boys once sang; “I want it that way”). They still hold a portfolio of song rights. That’s still worth $1.9bn or so. I personally cannot stand Ed Sheeran — he looks like a backpacker who got lucky; someone who perpetually showers in hostels and wears jandals (yikes!). But his music, whether I like him or not, is going to keep being play and sold and so on — ditto Debbie Harry and co.
If I was UMG, I would be looking very closely at all of this and thinking — huh; we already own 33% or so of the world’s streaming rights, what’s another $1.9bn? Ditto if I was Sony or Warner Music Group. It’s cheap, and they are incentivised to sell — all that debt that isn’t low interest anymore.
If I was Blackstone, which already has a partnership with Hipgnosis, I’d be looking at offering money on the spot. I’m just speculating. But c’mon — this is a stock that’s gotta have vultures circling. Music sells. Hipgnosis just paid too much for it.
Ozempic-mania
Losing weight the right way is out. Losing weight via an injection is in. Ozempic is the king. Novo Nordisk is the absolute indisputable world-champion of this — their stock has rallied like crazy. So has Eli Lilly’s, but Eli Lilly can’t make enough of their competing drug — “Zepbound” (would’ve picked a better name if I was them).
Anyway, my interest isn’t in either of those drugs — my interest is in “Ozempic sag”, which is a real thing. Read all about it. I was thinking, who are the net beneficiaries of sagging faces? In other words — who makes Botox, and who makes filler? (juvederm). The answer is AbbVie (ABBV.NYSE) — its stock has surged 12% this year (versus Novo’s +22.6%). As I said, I’ve been reading Private Equity by Carrie Sun (good read) — Chase Coleman, I think, would call this a pair trade — buy the pickaxes that happen after the Ozempic boom (if you are a man, you’d be surprised about how many women use ‘too or filler — if it’s a good job, you don’t notice). Again, not investment advice (!) but a fun idea to play with — what is the cause/effect of Ozempic? Sag. Who is the net beneficiary? ‘Tox and fillers. (If you are my partner, you would dismiss this — as she did — because she buys it all from Korea and injects herself. She is an outlier. Don’t do that. When I was in Paris she injected my face with some kind of formula and I have to admit — my skin glowed. Korea for the win?!)
Source post: Blackbull Research - Substack