ETFS Capital Limited (“ETFS”), the largest combined
owner of common stock, $0.01 par value (the “Common
Stock”) and Series A Non-Voting Convertible Preferred Stock (the
“Series A Preferred Stock”) of WisdomTree Investments, Inc.
(“WisdomTree” or the “Company”) (NASDAQ:WETF), with aggregate
ownership of approximately 10.4% of the outstanding Common Stock,
which together with its Series A Preferred Stock would represent
approximately 18.6% of the Company’s outstanding Common Stock on an
as-converted basis, and Lion Point Capital, LP (together with
certain of its affiliates, “Lion Point” and together with ETFS, the
“Group”), which owns 3.1% of the outstanding Common Stock,
announced today their nomination of three highly qualified
individuals for election to the Board of Directors of WisdomTree
(the “Board”) at the Company’s 2022 annual meeting of stockholders
and issued an open letter to the Board.
The Group believes its independent nominees will
actively contribute to the creation of stockholder value at
WisdomTree by leveraging their strategic acumen and leadership
experience, improving the Board’s ESG initiatives, and by drawing
on their deep knowledge of ETFs and ETPs in WisdomTree’s core
markets, including Commodity and Currency, U.S. Equity,
International Developed Market Equity, Emerging Market Equity and
Digital Assets/Cryptocurrency.
The full text of the letter sent to WisdomTree
follows:
March 18, 2022
Dear Board Members,
ETFS Capital Limited (“ETFS”) and Lion Point
Capital, LP (together with certain of its affiliates, “Lion Point”)
currently beneficially own approximately 13.5% of the
outstanding common stock of WisdomTree Investments, Inc.
(“WisdomTree” or the “Company”) and approximately 21.4% of the
Company upon conversion of their Series A Non-Voting Convertible
Preferred Stock,1 making us the Company’s largest economic
holder, and unquestionably aligning us with all stockholders
and constituents of the Company to drive significant value
creation. As you know, ETFS has been the
largest beneficial owner of the Company since
WisdomTree’s acquisition of the ETF Securities Exchange Traded
Commodity, Currency and Short and Leveraged business (the
“European ETC Business”) in April 2018 from
ETFS.
ETFS is one of the oldest
and most successful independent ETF operators globally, having
created over one billion dollars of enterprise value
since its launch by operating ETF issuance
businesses and allocating capital to businesses in the ETF
ecosphere and Digital Assets space. Lion Point is an
investment firm that has significant experience in creating value
at public and private companies through strategic changes,
operational efficiency improvements and governance enhancements.
Lion Point and ETFS have formed a group with regards to their
investment in WisdomTree after having independently reached similar
conclusions about the significant opportunity to create value
through actions within the control of the management and board of
directors of WisdomTree (the “Board”). ETFS’ track record as
an operator and investor in the ETF and Digital
Assets industries, coupled with Lion Point’s
value-add research and governance expertise renders us
uniquely qualified to provide
views on the strategy, operational
efficiency and governance effectiveness of
WisdomTree.
ETFS agreed to sell its
European ETC Business to WisdomTree based
on the belief that the combination of the
Company’s U.S. ETF franchise and ETFS’
European ETC Business had significant value
creation potential that could
be unlocked, either as an independent company or as
part of a larger entity, by a management team that ETFS was led to
believe had intellectual humility, foresight and focus. Like other
WisdomTree stockholders at the time of the sale of the European ETC
Business to WisdomTree, ETFS expected the Company
to be able to create value for all stockholders without
the need of a guiding hand and thus agreed, despite ETFS being the
largest economic holder of the Company by a large
margin, not to have any representatives on the Board.
Furthermore, it acquiesced to the Company’s requests to limit
ETFS’s voting rights through the issuance of non-voting preferred
shares that have substantially equivalent economic rights to common
stock, as noted above, these preferred shares are not convertible
while ETFS holds 9.9% or more of the Company’s outstanding
stock.
Since
then, however, WisdomTree has squandered
its credibility, as demonstrated by its destruction of
invested capital, inability to align its cost structure to industry
benchmarks and failure to grow assets under management in line with
its competitors, which we believe are the primary causes of its
poor stockholder returns and stagnating valuation metrics. To be
specific, since the closing of the acquisition of ETFS’ European
ETC Business, the Company’s forward earnings multiple has
steadily and materially compressed from 24x to
15x2 and stockholders have suffered the Company’s
significant underperformance as compared to the Dow Jones Asset
Managers index by over 60%.3 In summary, while
peers have significantly appreciated, WisdomTree stockholders have
seen over $400 million in value – approximately 50% of
its current market capitalization – destroyed by the present
management team and Board. Since 2018, WisdomTree has even managed
to materially underperform all but one of its peers who have
significant or sole exposure to mutual funds, which
face sustained and significant headwinds due to the
continuing migration of assets from mutual funds to
ETFs.4 Remarkably, over the same period, it was the
business ETFS built – the European ETC Business - which
has consistently outperformed expectations while the legacy part of
WisdomTree has languished. Assets under management in the acquired
European ETC Business have increased by almost 45%, while the
existing part of WisdomTree has had only anemic
asset growth of approximately 14%.5
This massive underperformance first came to the
attention of Lion Point when it was approached, several years ago,
by certain former employees of the Company who were concerned about
what was happening at the Company. Since then, Lion Point has
attempted to identify the root causes of this
underperformance, which led Lion Point to interview over
50 people among former WisdomTree employees, competitors,
industry bankers, potential acquirers, and vendors of the
Company. Surprisingly, it was the discussions with
Company vendors, partners, and several former
senior employees that drew the most detailed
and troubling picture of the origins of the value
destruction at the Company, namely: the apparent ineffective
management culture, which caused the departures
of several senior executives and Board
members due to “cultural problems,” recent stock sales by
insiders while at the same time touting the Company’s
growth, poor capital allocation, bloated cost structure,
multiple unfulfilled “organic growth” promises, frequent
strategic shifts, and lack of robust Board oversight
and challenge.
In the hope of putting our expertise as
operators and investor advocates to the Company’s
service, we have attempted multiple times
to initiate private conversations with
the Board to provide constructive and practical
assistance and to reach a mutually agreeable and pragmatic
arrangement that, at a minimum, would enhance
the Company’s Board. For example, and, in our view, in
accordance with bare minimum corporate governance
standards, we proposed that the Company replace
directors who have served on the Board for 15 years or
more with stockholder-identified directors who
have relevant ETF experience – a deeply critical skillset the
current Board is sorely missing. We also indicated to the
Company our willingness to work with the Board to ensure a smooth
CEO replacement process, without needing to give ETFS or Lion
Point any credit for the changes, similar to Lion Point’s
other prior successful engagements where management teams
have been replaced and significant value was thereafter
unlocked for such stockholders. To date, the Company has
declined to respond to all such offers of assistance.
Astoundingly, after rejecting an earlier
proposal from ETFS to add even a
single stockholder-appointed director to the Board to
bolster its ability to actively oversee and
test management’s decision process, the Chairman
responded that “the board does not look for directors with any ETF
expertise as that is what management does. Having an ETF background
is not a criteria when looking for directors.” Then, shortly after
our announcement that ETFS and Lion Point had formed a
group and while we were in the midst of potential
settlement discussions, the Board reactively and defensively
adopted a stockholder rights agreement or “poison pill”
that we believe achieves nothing other than highlighting the
Board’s entrenchment. In our view,
disingenuously ignoring our invitation to enter into
settlement discussions while stating that the Board is open to
engage with us only confirms what was clearly outlined by
index stockholders’ adverse votes at prior annual meetings, the
Company’s staggered board structure and excessive
compensation: the Company’s proxy filings claims of “continuously
striving to improve corporate governance” is unfounded in
substance. In fact, their statements make us wonder if they
even understand what the role of a Board of Directors is at
all.
We strongly believe that
WisdomTree critically needs a new CEO, improved execution and
enhanced Board oversight to restore its lost credibility
with stockholders. As we explained during a call with the
Company last week, ETFS and Lion Point have a proven track
record of value creation across a number of environmental,
social and governance related investments, through their focus
on growth initiatives, operational efficiency improvements
and implementation of governance best practices. We
firmly believe that the addition of highly qualified
directors with relevant backgrounds and direct industry
experience, can help identify and appoint a new CEO and guide
WisdomTree so that it can regain its best-in-class
company status in its industry while
generating significant value for all stockholders.
For those reasons, in order
to preserve our rights ahead of the Company’s Annual
Meeting and as further described in our formal nomination
notice delivered to the Company today, we are
nominating three highly-qualified director candidates –
Graham Tuckwell, Deborah Fuhr and Lynn Blake – for election at the
2022 Annual Meeting (collectively, the “Nominees”). To
aid in the identification of our independent nominees,
Lion Point engaged two highly reputable search
firms who routinely work with public company boards to
identify candidates who collectively have:
successful track records of value creation in the ETF
industry, demonstrable ETF operating experience, ETF industry
opinion leader status, public company experience, and
strong equality advocacy credentials. As you can see from
our Nominees’ biographies included below, we have
identified candidates who have extensive experience in overseeing
and/or analyzing billions in value of ETF assets under
management, possess unquestionable industry knowledge,
and some of whom have created substantial value for their
backers by investing in the ETF industry.
We note that two of our nominees have substantial experience in the
European ETF market, where almost half the Company’s assets are
located. This is a much-needed gap to be filled, as none of the
Board members appear to have any European ETF experience.
Despite the Company’s actions of recent
days, we remain open to reaching a mutually agreeable
solution. We have acted in good faith and have repeatedly
reiterated that we do not need to be given “credit” for changes at
the Company since our interests are aligned with those of all
WisdomTree stockholders. In the absence
of a mutually agreeable settlement that
addresses our key concern of significant improvement in execution
and the Board’s effectiveness, we will be left with no option other
than to vigorously highlight in greater detail the long
string of Board and management’s missteps to WisdomTree’s
stockholders, proxy advisory firms, independent financial
advisors, the Company’s vendors and partners, industry media, and
investors in WisdomTree’s products. Our hope is that, as the
saying goes, sunshine is the best medicine, and we stand ready
to shine a light on WisdomTree over the coming months and
years, if necessary.
As we said in our last unanswered communication
to you earlier this week, we stand ready and look forward to
discussing the Company’s response, if any, to our proposals at a
time of your convenience.
Yours truly,Graham Tuckwell ChairmanETFS Capital
Limited |
Didric CederholmChief Investment
OfficerLion Point Capital, LP |
Our Nominees:
Graham Tuckwell. Mr. Tuckwell
is the Founder and Chairman of ETFS Capital Limited (f/k/a ETF
Securities Limited), a strategic investment company focused on
growth opportunities across the ETF ecosystem. Mr. Tuckwell founded
ETF Securities Limited in 2004 and it became one of the leading
issuers of Exchange Traded Products in Europe. In 2018 the European
and US businesses were sold but the Australian business was
retained, and under his guidance, as Executive Chairman of ETF
Securities Australia, assets under management have increased by
more than 400% since then. Mr. Tuckwell is credited with
creating the world’s first gold ETF when he launched GOLD on the
Australian Stock Exchange in 2003. Later that year, he launched a
similar product, GBS, on the London Stock Exchange in partnership
with the World Gold Council. Prior to working in the ETF industry,
Mr. Tuckwell worked in corporate advisory and investment banking
for 20 years in Australia and London, and before then, he worked as
an economist in the Department of Prime Minister and Cabinet in
Canberra. He holds a Bachelor of Economics (Honours) degree and a
Bachelor of Laws degree from the Australian National University. In
2015 he was awarded an honorary Doctorate degree from the Australia
National University, in 2016 he received the ETF.com Lifetime
Achievement Award for Europe, and in the 2022 Australia Day Honours
List he was appointed an Officer of the Order of Australia for
“distinguished service to the community through philanthropic
support of educational scholarships, and to business.”
Deborah Fuhr. Ms. Fuhr has been
the managing partner of ETFGI, a leading independent research and
consultancy firm in the global ETF and Exchange Traded Products
(ETP) industries since she founded the firm in 2012. She has been
an editorial director, producer, and presenter at ETF TV, a show
which provides monthly insights into the ET and ETP markets since
she co-founded the show in June 2019. Ms. Fuhr also served as vice
chair of the Nasdaq Listing and Hearing Review Council from 2017
until 2019, and as a member on the Nasdaq listing and hearings
Council from 2014 to 2017. Ms. Fuhr was the Global Head of ETF
Research and Implementation Strategy team at BlackRock, Inc. (NSYE:
BLK) from 2008 to 2011. Previously, she was a managing director and
headed the Investment Strategies Group at Morgan Stanley. She also
has served as a Board member and Vice president for Women in ETFS,
the first women’s group for the ETF industry, since she helped
found the non-profit organization in 2014. She has won numerous
awards in the financial industry, including the ETF.com 2018
lifetime achievement award, 100 Women in Finance’s 2017 European
Industry Leadership Award, and the 2014 William F. Sharpe Lifetime
Achievement Award for outstanding and lasting contributions to the
field of index investing, among others.
Lynn Blake. Lynn Blake is a
former Chief Investment Officer who retired in September 2021 from
State Street Global Advisors (“SSGA”), the investment management
division of State Street Corporation, one of the world’s largest
asset managers. As Chief Investment Officer of SSGA, Lynn was
responsible for $2.5 trillion in assets under management and a
P&L with over $1 billion in revenues. She served as a director
of the SSGA Trust Company, the governing board for SSGA from 2018
to 2021. From 2011 to 2021, she served as the Executive Vice
President and Chief Investment Officer of Equity Indexing, Smart
Beta and ESG strategies at SSGA. In addition to heading ESG
research and ESG data, Ms. Blake also had oversight and management
of SSGA Asset Stewardship activities, giving her a perspective on
critical proxy voting issues for shareholders. Previously, she
served as the head of Non-US Equity Indexing from 1999 to 2010. She
also worked as a senior Portfolio Manager at SSGA from 1990 to
August 1999.
About ETFS Capital Limited
ETFS Capital Limited is a London based strategic
investment company focused on growth opportunities across the ETF
ecosystem. As part of its investment process, ETFS Capital receives
and analyses many dozens of business ideas and proposals within the
ETF ecosphere each year and conducts in-depth technical and
commercial due diligence on the companies where it chooses to
deploy capital. Thereafter it engages in a hands-on approach, as a
partner to management teams and boards bringing its unparalleled
industry specific expertise for the benefit of those companies.
About Lion Point Capital, LP
Lion Point Capital, LP is a global investment
firm that seeks to invest in equity and debt securities of
undervalued public and private companies. Our partners have
extensive experience and a successful track record of uncovering
and unlocking value through rigorous fundamental analysis and
thoughtful actions, encompassing growth investments, strategic
changes, operational efficiency improvements and governance
enhancements.
CERTAIN INFORMATION CONCERNING THE
PARTICIPANTS
ETFS Capital Limited (“ETFS Capital”) and the
other Participants (as defined below), intend to file a preliminary
proxy statement and accompanying WHITE proxy card
with the Securities and Exchange Commission (“SEC”) to be used to
solicit votes for the election of their slate of highly qualified
director nominees at the 2022 annual meeting of stockholders of
WisdomTree Investments, Inc. a Delaware corporation (the
“Company”).
ETFS CAPITAL STRONGLY ADVISES ALL STOCKHOLDERS
OF THE COMPANY TO READ THE PROXY STATEMENT AND OTHER PROXY
MATERIALS, INCLUDING A PROXY CARD, AS THEY BECOME AVAILABLE BECAUSE
THEY WILL CONTAIN IMPORTANT INFORMATION. SUCH PROXY MATERIALS WILL
BE AVAILABLE AT NO CHARGE ON THE SEC’S WEB SITE AT
HTTP://WWW.SEC.GOV. IN ADDITION, THE PARTICIPANTS IN THIS PROXY
SOLICITATION WILL PROVIDE COPIES OF THE PROXY STATEMENT WITHOUT
CHARGE, WHEN AVAILABLE, UPON REQUEST. REQUESTS FOR COPIES SHOULD BE
DIRECTED TO THE PARTICIPANTS’ PROXY SOLICITOR.
The participants in the proxy solicitation are
anticipated to be ETFS Capital, Lion Point Master, LP (“Lion Point
Master”), Lion Point Capital GP, LLC (“Lion Point GP”), Lion Point
Capital, LP (“Lion Point Capital”), Lion Point Holdings GP, LLC
(“Lion Point Holdings”), Graham Tuckwell, Didric Cederholm, Lynn S.
Blake and Deborah Fuhr (collectively, the
“Participants”). As
of the date hereof, ETFS Capital directly beneficially owns
15,250,000 shares of common stock, $0.01 par value per share, of
the Company (the “Common Stock”). ETFS Capital also directly owns
14,750 shares of the issuer's Series A Non-Voting Convertible
Preferred Stock, which are convertible immediately into 14,750,000
shares of Common Stock at the holder's option. The Certificate of
Designations for the Series A Non-Voting Convertible Preferred
Stock (the "Preferred Stock") restricts ETFS Capital from
converting such Preferred Stock into Common Stock if ETFS Capital
would beneficially own more than 9.99% of the Issuer's outstanding
Common Stock after giving effect to such conversion, and renders
any conversions over such amount void ab initio (the “Conversion
Cap”). As the Chairman and controlling shareholder of ETFS Capital,
Mr. Tuckwell may be deemed an indirect beneficial owner of the
15,250,000 shares of Common Stock directly owned by ETFS Capital
and the 14,750 shares of Preferred Stock directly owned by ETFS
Capital. As of the date hereof, Lion Point Master directly
beneficially owns 4,521,979 shares of Common Stock. As the general
partner of Lion Point Master, Lion Point GP may be deemed to
beneficially own the 4,521,979 shares of Common Stock directly
owned by Lion Point Master. As the investment manager of Lion Point
Master, Lion Point Capital may be deemed to beneficially own the
4,521,979 shares of Common Stock directly owned by Lion Point
Master. As the general partner of Lion Point Capital, Lion Point
Holdings may be deemed to beneficially own the 4,521,979 shares of
Common Stock directly owned by Lion Point Master. As a Manager and
Member of Lion Point Holdings, Mr. Cederholm may be deemed the
beneficial owner of the 4,521,979 shares of Common Stock owned
directly by Lion Point Master.
Investor Contacts:
ETFS:
Martyn James, (+44) 207-509-0674 info@etfscapital.com
Lion Point:
Cristiano Amoruso, (212) 356-6200info@lionpoint.com
1 The conversion of the Series A Non-Voting
Convertible Preferred Stock is subject to a 9.9% beneficial
ownership limitation and such shares are not currently
convertible.2 Source: Bloomberg.3 Source: Bloomberg.4 Capital IQ.
Peers include: BLK CNS, TROW, AMG, AB, APAM, BEN, BSIG, DHIL, FHI,
GBL, IVZ, JHG, VCTR, VRTS, WHG BSIG, DHIL, FHI, GBL, IVZ, JHG,
VCTR, VRTS, WHG5 Source: WisdomTree Investor Relations
(http://ir.wisdomtree.com/) via the Company’s “Historical ETF AuM”
excel link.
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