SHAREHOLDERS in music management company Sanctuary could see their stake wiped out if plans to bring new capital into the company go ahead.

The latest blow comes after the company behind artists including Beyonce and Elton John, revealed it was considering seeking investment in the company to reduce its debts.

Shareholders have seen the value of the company slump to about £12m, from a peak of £240m, after profit warnings and accounting problems.

Sanctuary said it still had the support of its banks, but that it was considering raising a significant amount of equity. It is expected to be structured as a rights issue and raise about £100m from investors, virtually wiping out the equity of existing shareholders.

The group, which employs about 300 people in the UK, runs a management business for musicians, with stars such as Manic Street Preachers, Nelly, Morrissey and Iron Maiden on its books.

It is also the UK's largest independent record company and owns the biggest live tour booking agency outside the US.

Sanctuary has been affected by delays to releases from its Urban division featuring rap and R&B artists. Negative headlines after profit warnings also had an impact on the business, particularly its records division, the company said.

Executive chairman Andy Taylor said: "We have acknowledged that Sanctuary has expanded too rapidly and we are working very hard to re-set the business for future sustainable growth.

"We know we have a strong business model and we continue to enjoy the support of some of the highest-profile artists in the world."