Stifel poses key questions around Hipgnosis' future capital growth prospects

Downgrades stock to 'neutral'

Stifel has raised questions over the methods used to value Hipgnosis Songs Fund's portfolio, which it believes will limit future capital gains in favour of short-term share price boosts.

The broker also queried whether the six-month lag between when revenue is booked and when cash is actually received could lead to collection estimates to be inaccurate. Hipgnosis has been able to raise cash at a fast pace since its July 2018 IPO, growing from £200m to over £1bn today, with share price gains of 27.9% eclipsed by a net asset value increase of 38.6%. Indeed, the company's NAV is up 26.9% in the past nine months on continued positive catalogue re-valuations and a reduced rate of the discount applied to its portfolio of music rights. Music royalties to play bigger part ...