Wisdomtree’s largest shareholder and an activist investor are urging for the removal of its chief executive and a board shake-up to “restore its lost credibility” after years of anaemic growth and disappointing returns.
In an open letter to shareholders, ETFS Capital and Lion Point claim Wisdomtree’s “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” are to blame for “poor stockholder returns and stagnating valuation metrics”.
ETFS, which was founded by Graham Tuckwell, owns 18.6% of the business, having sold its European ETC arm to Wisdomtree in 2018, while activist hedge fund Lion Point owns a 3.1% stake.
The pair claim Wisdomtree CEO Jonathan Steinberg and his management team have “destroyed” $400m of the company’s current market value.
Since Wisdomtree acquired ETFS’ European arm, its shares have more than halved and ETFS and Lion Point note its forward earnings multiple has “steadily and materially compressed” from 24x to 15x.
Additionally, they note the $77.7bn US ETF house has materially underperformed all but one of its peers. While assets under management in ETFS’ European ETC business have grown by 45% since the acquisition, assets in Wisdomtree’s legacy business have seen “anaemic growth” of 14%.
To turn the business around, ETFS and Lion Point are pressing for a new CEO and a trio of new directors to be voted onto the board at the annual shareholder meeting in June. Tuckwell is among the nominees, along with ETFGI managing partner Deborah Fuhr and ex-State Street Global Advisors CIO Lynn Blake.
All three have “extensive experience in overseeing and/or analysing billions in value of ETF assets”, including in the European ETF market where half the company’s assets are located. This last area is a “much-needed gap to be filled”, ETFS and Lion Point said, noting that “none of the board members appear to have any European ETF experience”.
“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.”
Wisdomtree was approached for comment but did not reply in time for publication.
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