MERCK'S SINGING A HAPPY TUNE

Songs, as an asset class, continue to be a bright financial spot during the COVID-19 pandemic, as Merck Mercuriadis reports a 15% spike since mid-July in the value of shares of his Hipgnosis Songs Fund.

The operative Net Asset Value per C Share increased to 112.39p as of 9/30, an increase of 15.5% on a constant currency basis (14.7% including the impact of FX changes) since 7/15. The company will announce interim results for the six months ended 9/30 on Friday (12/4).

The Operative NAV (the net asset value which includes the catalog valuations) for the Ordinary Shares increased by +10% to 125.35 (up from 116.42) pence per share on a constant currency basis, driven by catalog growth and formidable revenue.

“The NAV total return since IPO of 38% demonstrates not only the uncorrelated strength of these great songs, but also Hipgnosis’ ability to buy tremendous songs well and then manage them to add value,” Mercuriadis said. The fund has two current high-earners: “All I Want for Christmas Is You,” by Mariah Carey (the Walter Afanasieff catalog), and “Prisoner,” by Miley Cyrus f/Dua Lipa (a Stefan Johnson co-write).

An increase in streaming revenue received from emerging digital platforms such as TikTok and Peloton is among the reasons for the increase in the value of the catalogs. A reduction in the discount rate used by the independent valuer to 8.5% from 9% is another. That reduction owes to the decreased risk premium associated with music thanks to the increased consumption of music through paid streaming.

In a related story, we've got a sneak preview of Merck's Christmas tree.