After trading at a deep discount to net asset value, the sale would be a win-win for buyer and seller (and for a major competitor, too).
The deal comes as Round Hill’s share price struggled to meet expectations and falls short of it the value ascribed by multiple independent experts. Concord bid $1.15 per share, 11.5% below the per-share net asset value ascribed to Round Hill by Citron Cooperman, a leading valuation expert. Round Hill’s shares had been trading at a 47% discount to NAV the prior day and had fallen 11.5% year to date.
Other people see additional positives in Concord’s bid for Round Hill’s music royalty fund — which still leaves Round Hill with a substantial publishing and recorded music business. To some, the acquisition reflects a functioning market in which Round Hill’s music assets are moving to Concord’s more efficient cost structure., senior managing partner at Virtu Global Advisors, says the deal shows the market is working as intended.
Some equity analysts have raised questions about not just the valuations but the music industry’s tendency to constantly update NAV. Most funds in other sectors hold their new acquired assets at cost “until there are verifiable reasons” — such as a market transaction — “to suggest a change is warranted,” Stiefel analysts wrote in a Jan. 7, 2021, note to Hipgnosis investors.
The move appears to have helped some: Round Hill’s share price rose 19.7% over the following month . But whether investors remained concerned with NAV methodologies or motivated by rising interest rates and other macroeconomic factors, Round Hill’s share price remained well below NAV until last week.
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