WisdomTree Starts Share Offering

January 30, 2012

For those bullish on ETFs, WisdomTree’s share offering might be another way to express an opinion.

WisdomTree, the only pure U.S. exchange-traded fund company that’s publicly traded, is now in the process of carrying out a secondary stock offering it first filed for last year. The sale will provide the fast-growing New York-based company with funds to fuel its quickening expansion.

Of the 14,362,251 shares on offer, 1 million are newly issued, while the balance of shares is coming from selling shareholders, according to an amended “S-1” filing the company made with the Securities and Exchange Commission today. Proceeds from the 1 million newly issued shares will be used for “general corporate purposes,” but the company won’t receive proceeds from the selling shareholders. A company official declined to comment, apart from confirming that the new filing suggests the share offering was under way.

The sale of shares to the public comes at a time when WisdomTree and the ETF industry as a whole are growing briskly despite challenging economic times. WisdomTree’s assets under management rose last year by $2.3 billion, or 23 percent. Net inflows into its ETFs reached $3.9 billion in 2011, up 24 percent from 2010, and the company’s market share of ETF industry net inflows reached 3.4 percent, compared with 2.7 percent in 2010.

The company, whose shares trade on Nasdaq under the symbol “WETF,” said in the prospectus the maximum offering price would be $6.31 a share. The stock fell by more than 10 percent today to $5.66 a share, according to data on Google Finance. The company isn’t commenting beyond the information contained in the prospectus.

Successful Funds

Some of the company’s funds, such as the WisdomTree Emerging Markets Local Debt Fund (NYSEArca: ELD), have been among the most popular ETFs. ELD, which also happens to be an actively managed fund, now has $1.13 billion in assets. Overall, WisdomTree had $13.6 billion of assets under management as of Jan. 27, making it the seventh-largest U.S. ETF firm, according to the prospectus.

Total ETF assets, including market movement, rose 5 percent last year, to $1.062 trillion. Net ETF inflows totaled $119 billion—about twice the fresh investment going into traditional mutual funds. In the past week, total ETF assets are again reaching records levels, eclipsing a previous high set in early May 2011. As of Jan. 27, total assets in U.S.-listed ETFs were at a record $1.152 trillion, according to data compiled by IndexUniverse.

WisdomTree has 47 ETFs and is known for its lineup of funds that screen securities for attractive dividends and earnings. In the share-offering prospectus, the company said its indexing methodology has helped 26 of its 34 equity ETFs outperform their market capitalization-weighted or competitive benchmarks.

That indexing methodology is now also the subject of a lawsuit brought by Rob Arnott’s fundamental indexation firm Research Affiliates, which charged WisdomTree with patent infringement. WisdomTree officials haven’t commented on the suit, in part because of the quiet period regulators imposed in connection with the share offering.

WisdomTree also said in the prospectus that it has the ETF market’s only managed-futures strategy. That was a reference to the WisdomTree Managed Futures Strategy Fund (NYSEArca: WDTI), which had assets of $233.7 million.

Apart from ELD, some of the company’s other funds that have been hits with the investing public include the WisdomTree EM Equity Income ETF (NYSEArca: DEM), which has $2.62 billion in assets, and the WisdomTree Dreyfus Chinese Yuan Fund (NYSEArca: CYB), which has $443.9 million in assets.

The company said in its prospectus that the underwriters also have an option to buy an additional 2,154,336 shares from some of the selling stockholders.


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