An activist investor group made up of ETFS Capital and Lion Point Capital have issued an open letter calling for the resignation of WisdomTree CEO Jonathan Steinberg while nominating three candidates they would like to see on the firm’s board.
The letter read: “We strongly believe that WisdomTree critically needs a new CEO, improved execution and enhanced board oversight to restore its lost credibility with stockholders.
“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,” it continued.
The shareholders then went on to identify 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.
The letter added two of the nominees have “substantial experience in the European ETF market” where almost half of WisdomTree’s assets are located.
ETFS Capital – formerly ETF Securities – acquired its stake in WisdomTree in 2018 when it sold its European and North American asset management businesses.
It currently owns 10.4% of WisdomTree common stock while Lion Point Capital has a stake of 3.1%.
ETFS Capital continued in the letter, stating when it sold its European exchange-traded commodities (ETC) business to WisdomTree, it had expected the firm to be able to create shareholder value without a guiding hand – and therefore agreed not to have any representatives on the firm’s board.
Instead, ETFS Capital complained WisdomTree had “squandered its credibility” and that while all but one of its competitors had continued appreciating, WisdomTree’s current management team and board had “destroyed” over $400m in value.
It continued, noting the European ETC business that ETFS Capital had built was the only part of the firm’s range that had continued to outperform expectations while WisdomTree’s legacy offerings had “languished”.
Lion Point also interviewed 50 former WisdomTree employees, competitors and industry members, who attributed the firm’s underperformance to an “ineffective management culture”, “poor capital allocation”, “bloated cost structure”, “frequent strategic shifts”, a lack of board oversight and “multiple” unfulfilled growth promises.
ETFS Capital said it had proposed replacing directors who had served more than 15 years on the board with shareholder-identified directors with relevant ETF experience but had not had a response from WisdomTree.
The scathing letter, published last Friday, came only two days after WisdomTree issued a shareholder rights agreement – or poison pill – to prevent a hostile takeover by ETFS Capital.
ETFS Capital concluded by stating in the absence of a “mutually agreeable settlement” on the board’s effectiveness, it would move to “vigorously highlight the long string of board and management’s missteps”.
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