Mute start for equities, Hipgnosis Songs Fund chaos takes a new turn and Frasers increases stake in Boohoo

“A mute start to the week for European indices suggests a sense of nervousness, particularly as the US reporting season gets underway and investors worry about a cautious tone in corporate outlooks,” say Russ Mould, Investment Director at AJ Bell.

“The FTSE 100 was flat at 7,597, with strength in retail and mining stocks offset by weakness in pharmaceuticals amid negative read-across from Pfizer’s weak update.

“Ocado fell after a broker downgrade on the stock, citing concerns about delays to rolling out new fulfilment centres and competition for warehouse automation systems intensifying.”

Hipgnosis Songs Fund

“Hipgnosis Songs Fund tumbled by more than 10% after scrapping its dividend. The investment company was set up to invest in music royalties, implying their regular cash flows would generate a growing stream of income for investors.

“Sadly, its fifteen minutes of fame has gone up in smoke amid accusations of poor corporate governance, a disastrous attempt to sell some assets at a big discount to a private fund which its adviser also manages, and now a dividend crisis.

“Investors will decide the future of Hipgnosis Songs Fund at a continuation vote on 26 October. It’s not looking good, given how the value of the company continues to decline and now it isn’t even paying a dividend – shocking given how income was meant to account for a key part of investment returns.

“It’s hard to see how the board of directors can put up with this chaos – perhaps it is time to oust the management team and bring in someone else.”

Frasers / Boohoo

“Frasers now owns 15.12% of Boohoo, having taken advantage of share price weakness to increase its stake. Boohoo’s shares last week traded at their lowest level since 2015.

“Boohoo has been struggling with cost pressures and weak demand, which have squeezed its margins and left the business loss-making.

“Frasers loves a bargain and clearly sees an opportunity to have influence over Boohoo’s strategy, possibly as another avenue to sell its range of athleisure brands.

“But equally, Frasers might be viewing this simply as a way to make a quick buck – a chance to buy shares on the cheap and then flip them should see the online retailer be successful in its turnaround efforts.”

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