The Hipgnosis Songs Fund bidding war can go higher, according to trends shown from some investors.
Concord and Blackstone are in a bidding war to acquire the equity of Hipgnosis Songs Fund . On Wednesday , Concordon Sunday . In response to Concord’s latest offer, Blackstone said on Thursday that it was “considering its options.”Some investors are betting the bidding will go well above the current offers. On Tuesday, shares of HSF rose as high as 1.03 pounds respectively, 3.2% above Blackstone’s offer, and closed at 1.01 GBP , 1.6% above its bid.
Concord could have two advantages that would allow it to bid higher than Blackstone: its source of funding and its ability to administer HSF’s portfolio. “If all else is equal,” Stifel analysts wrote in a Monday note to investors, Concord can outbid Blackstone because it has a lower cost of capital — Michigan Retirement Systems, a state pension fund — and a superior ability to “extract revenue from an under-managed portfolio.
But Blackstone has a trump card: Hipgnosis Song Management, which is majority owned by Blackstone, has an investor advisory agreement with HSF gives it a call option to acquire HSF’s portfolio if the advisory agreement is terminated. Stifel analysts believe the call option could act as “a deterrent” to prevent further price escalation — although it didn’t prevent Concord from bidding a second time. HSM appears determined to employ the call option.
Investors run the risk that the bidding process for HSF won’t transpire as they anticipated. In the case of Believe, WMG never made a formal offer and eventually— which could leave investors who bought Believe shares as high as 16.58 euros in the red if the acquisition proceeds at the original 15-euros per share offer.
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