In a regulatory filing on 14 March, the ‘poison pill’ – officially known as a shareholder rights agreement – effectively prevents any party from acquiring more than 10% of the common stock in WisdomTree until the day after the company’s annual general meeting in June or potentially until March 2023 if extended by a shareholder vote.
While the WisdomTree board cited “recent rapid accumulations of significant portions of outstanding common stock” and a desire to “guard against coercive tactics to gain control of the company” as the reasons for implementing the plan, the immediate effect is it prevents ETFS Capital – which already holds more than 10% – from increasing its current stake in an attempt to assist with its voting to change the firm’s board.
If ETFS Capital – or any other shareholder – were to increase their ownership in the US ETF issuer in such a way that triggered the poison pill, they would see their stake effectively halved as the rights plan gives all other shareholders the opportunity to exercise rights to purchase stock on a 1:1 basis at $0.01.
The ‘poison pill’ is not triggered unless a shareholder passes a threshold of 10% ownership of WisdomTree stock – or 20% for parties or products investing passively.
For shareholders that already exceed 10%, the agreement – or ‘poison pill’ – will only be triggered if they try to buy any more of the firm’s stock.
The latter applies to ETFS Capital which is currently pushing for a seat on WisdomTree’s board and currently has a 10.5% stake in the firm.
This move by WisdomTree follows last week’s news that ETFS Capital’s ambitions have been supported by activist investor Lion Point Capital which owns a 3.1% stake in WisdomTree.
ETFS Capital’s intention to gain a seat on the issuer’s board became public knowledge in January after ETFS Capital chairman Graham Tuckwell described what he saw as its underperformance under the stewardship of CEO Jonathan Steinberg.
ETFS Capital – previously ETF Securities – acquired its stake in WisdomTree in 2018 as part of the sale of its European and North American asset management businesses.
Shortly after the deal concluded, WisdomTree shares briefly traded as high as $11.70 a unit. The issuer’s shares were trading at $5.27, as at 14 March this year.