Hipgnosis Songs Fund (HSF), its investment adviser, and founder Merck Mercuriadis face a new lawsuit from 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 in or receiving this diverted business. HML, which ceased operations in 2018, had approximately $4.54 million (£3.6 million) in creditor debt at the time of its closure.

Key points about 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 defend against them

This legal challenge comes as HSF undergoes a strategic review, set to conclude by April 26th, 2024. The fund's stock (LON: SONG) recently experienced a 2.2% decline, closing at 69 pence per share.

Additional context: HML's co-founder, Afram Gergeo, was later imprisoned for involvement in a separate Maltese pension scheme fraud, though this is unrelated to the current lawsuit.

The fund is simultaneously working to appoint a new auditor while managing this legal situation. Neither HML nor its liquidators have provided additional public comments on the lawsuit's specifics.

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