By
Godfrey Benjamin
April 10th, 2024
Despite the public rejection, ETFS Capital moves its campaign directly to WisdomTree’s broader shareholder base.
ETFS Capital, a prominent activist investor handling a 10% ownership in WisdomTree, a New York-based asset management firm, has intensified its ongoing dispute over strategic direction. The conflict has escalated to a critical moment, forcing ETFS Capital to initiate a “withhold campaign”, according to a recent letter by ETFS Capital.
The campaign urges WisdomTree’s shareholders to abstain from voting for specific board members at the upcoming annual shareholder meeting. This strategic move underscores the intensifying conflict between the two entities over WisdomTree’s strategic direction and operational performance.
ETFS Capital contends that if WisdomTree optimizes its operational strategies, its stock valuation could surge by a minimum of 70%, reaching a remarkable $15.50 per share. Despite the stock’s impressive 32% year-to-date appreciation as of March 21, 2024, ETFS Capital asserts that a substantial “value gap” persists.
ETFS Capital Challenges WisdomTree’s Strategy
ETFS Capital raises concerns regarding WisdomTree’s strategic decisions. They challenge the firm’s resource deployment strategies, elevated operational expenditures, and recent venture into Decentralized Finance (DeFi) utilizing blockchain innovations. In their assessment, these decisions have not yielded optimal returns for investors.
ETFS Capital’s chairman, Graham Tuckwell, wrote a letter on March 21st, stating that private communication efforts with WisdomTree’s management over the past months were unsuccessful. Their February proposal involved engaging an investment bank to explore strategic options, returning capital to shareholders, and replacing certain executives. However, WisdomTree publicly rejected these suggestions in February 2024.
ETFS Capital Seeks Shareholder Support
Despite the public rejection, ETFS Capital moves its campaign directly to WisdomTree’s broader shareholder base. They encourage a “withhold campaign” – urging investors not to vote for unopposed board members seeking re-election. This strategy reveals shareholder dissatisfaction, pressuring the board by highlighting disagreement with their current direction.
“We intend to Withhold our votes from members of the Board at the upcoming shareholder meeting,” the letter states. “We invite other shareholders to do the same […] as a referendum on the company’s failed diversification strategy and its refusal to unlock value through a strategic review process.”
ETFS Capital boasts a notable track record in shaping WisdomTree’s board dynamics. Their influence manifested in 2023 when they facilitated the election of two candidates proposed by their firm, underscoring their capacity to sway shareholder perspectives.
With the annual meeting on the horizon, scrutiny centers on the reactions from other investors regarding ETFS Capital’s plea for action. This public disagreement between a reform-advocating investor and the asset firm portends substantial ramifications for WisdomTree’s future trajectory and leadership composition.