Industry Updates

WisdomTree fails to reach agreement with activist investors; Deal ‘thwarted’ by Steinberg

ETFS Capital and Lion Point Capital own a combined 13.5% of WisdomTree

Tom Eckett

a piano in a room

ETFS Capital, parent company of ETF Stream, and Lion Point Capital have repeated calls for WisdomTree CEO Jonathan Steinberg to resign after settlement discussions between the activist duo and the issuer broke down.

In an open letter to shareholders, the activist investors, which own a combined 13.5% of the company, said discussions were “thwarted” by Steinberg who “made clear his determination to preserve the status quo and not make any change to the way the company is operated”.

The open letter revealed discussions had been ongoing between WisdomTree’s board and the shareholders over the past month to reach an agreement about terminating the shareholder rights plan – known as a ‘poison pill’ – which was issued on 14 March and making changes to the board.

Furthermore, the letter said the two parties had an agreement in final form before “recent actions taken by WisdomTree over the last few days” showed the activist investors that WisdomTree has “no intention of honouring the spirit of any such agreement and is merely seeking to silence its largest stakeholders”.

“In conversations that occurred this past Monday, both the CEO and the chairman made it clear to ETFS Capital that they have no desire or intention to adopt changes to the operations or direction of the company in any meaningful way,” the letter added.

The letter went on to call for a referendum on Steinberg’s “credibility” as CEO of WisdomTree at the firm’s 2022 annual meeting.

“Steinberg, a director and the CEO who has presided over multiple years of value destruction and subpar returns, bears a large part of the responsibility for the company’s underperformance and staggering loss in market share.

“We believe his strategy of repeatedly attempting to chase the ‘next big thing’ (more often than not ending up in write-offs or divestitures), has caused the company to miss opportunities to capitalise on the cash generation and growth potential of WisdomTree’s core ETF franchise.

“We, and many other stockholders, strongly believe that WisdomTree critically needs a new CEO who is commercial has clear and proven ETF expertise with intellectual humility.”

The move follows the activist investors’ calls for Steinberg to resign in March in order to “restore lost credibility with stockholders”.

As part of the deal, the shareholders identified Graham Tuckwell, founder and chairman of ETFS Capital, Deborah Fuhr, managing partner of ETFGI and Lynn Blake, former CIO of State Street Global Advisors (SSGA), as potential candidates for election to WisdomTree’s board at its 2022 annual meeting.

“Our nominees have received tremendous support from stockholders of the company, many of whom have repeatedly expressed to us and the board, their frustration with the company’s historical underperformance and their strong desire for change at both the management and board level,” the letter added.

ETFS Capital – then known as ETF Securities – acquired a stake in WisdomTree via the sale of its European and North American asset management businesses in 2018. As part of the deal, Tuckwell was not allowed to seek management changes for three years.

At the time of the acquisition on 11 April 2018, WisdomTree shares were trading at $9 and briefly traded as high as $11.70 the following month. The issuer is currently trading at $6 a share, as at 4 May.

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