ETFS Capital Responds To WisdomTree 'Poison Pill' With Scathing Letter

Senior ETF Analyst

Mar 18, 2022

Reviewed by: Sumit Roy

Edited by: Sumit Roy

(Note: ETFS Capital is the parent company of ETF.com.)

Days after ETF issuer WisdomTree unveiled a "poison pill" to deter investment company ETFS Capital from accumulating more shares of its stock, the latter responded with a scathing open letter to WisdomTree’s board of directors.

It’s the latest salvo in a battle for control of WisdomTree’s board and influence over the direction of the company. ETFS Capital teamed up with fellow shareholder Lion Point Capital to pen the letter, and together they nominated three candidates to the WisdomTree board: Graham Tuckwell, Deborah Fuhr and Lynn Blake.

ETFS Capital and Lion Point Capital are seeking to have their nominees elected to the board at WisdomTree’s 2022 annual meeting. Together, the two firms currently control 13.5% of WisdomTree’s common stock and own 21.4% of the company when including their convertible preferred stock.

The two firms say they are disappointed with the performance of WisdomTree’s management and of its stock.

“…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,” they said in their letter.

“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 15x and stockholders have suffered the Company’s significant underperformance as compared to the Dow Jones Asset Managers index by over 60%. 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.”

WisdomTree’s stock peaked in 2015 when a rush of investor interest in currency-hedged ETFs like the WisdomTree Japan Hedged Equity Fund (DXJ) and the WisdomTree Europe Hedged Equity Fund (HEDJ) led to assets under management for the firm to balloon. At one point, HEDJ and DXJ had roughly $20 billion in AUM each. Today, they each have less than $2 billion in assets.

WisdomTree’s stock is down 79% since 2015.

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Sumit Roy

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Sumit Roy is the senior ETF analyst for etf.com, where he has worked for 13 years. He creates a variety of content for the platform, including news articles, analysis pieces, videos and podcasts.

Before joining etf.com, Sumit was the managing editor and commodities analyst for Hard Assets Investor. In those roles, he was responsible for most of the operations of HAI, a website dedicated to education about commodities investing.

Though he still closely follows the commodities beat, Sumit covers a much broader assortment of topics for etf.com, with a particular focus on stock and bond exchange-traded funds.

He is the host of etf.com’s Talk ETFs, a popular video series that features weekly interviews with thought leaders in the ETF industry. Sumit is also co-host of Exchange Traded Fridays, etf.com’s weekly podcast series.

He lives in the San Francisco Bay Area, where he enjoys climbing the city’s steep hills, playing chess and snowboarding in Lake Tahoe.

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