WisdomTree faces revolt by largest shareholder

WisdomTree’s biggest shareholder is attempting to seize control of the board of the $90.7bn US asset manager with the aim of ousting both the chief executive and chair in an increasingly acrimonious dispute over strategy.

Jonathan Steinberg, WisdomTree’s founder and chief executive, is planning to launch a blockchain-enabled digital assets platform this year but his plans are opposed by Graham Tuckwell, the largest shareholder, who argued that the company should focus on its core fund management business and on improving its operational performance.

Tuckwell, the driving force behind the creation of the world’s first gold exchange traded fund, has nominated himself for election to the board along with Bruce Aust, a former vice-chair at Nasdaq, the exchange operator, and Tonia Pankopf, managing partner at Pareto Advisors, an investment management consultant.

Six board seats are due to be voted at the annual shareholder meeting in June including the positions held by Steinberg and Frank Salerno, WisdomTree’s chair since 2019.

Steinberg remains convinced that adopting blockchain-enabled technology is key to the future success of the company which he founded as an investment magazine publisher in 1988 before overseeing its development into an ETF provider in 2006.

He has insisted that the investment made in developing the new WisdomTree Prime platform has not detracted from the company’s core ETF business which attracted net investor inflows of $12.2bn last year. That strong momentum has continued in the first quarter with net inflows reaching $6.3bn, pushing assets under management to a record high.

Steinberg told the FT in 2018 that he expected WisdomTree’s assets to reach $100bn without specifying a timeframe, a goal that is now within view.

UBS this week upgraded WisdomTree to “buy” and raised its 12-month share price target from $6 to $8 to reflect the manager’s “consistently strong” net inflows. It closed at $6.25 on Wednesday, up 14.8 per cent so far this year.

“Investors appear to understate WisdomTree’s value as a standalone franchise,” said Brennan Hawken, an analyst at UBS in New York.

Speaking to the FT last year, Steinberg said he was acutely aware that his leadership was under attack.

“I was taught to win with honour, lose with honour and to never cheat,” he said, a riposte that underlines the acrimony between himself and Tuckwell.

The dispute has been rumbling since WisdomTree acquired the European arm of ETF Securities, a London-based ETF specialist founded by Tuckwell in 2005, in a $611mn cash and shares deal in November 2017.

Both men believed that the deal would help the enlarged WisdomTree, then ranked as the world’s ninth-largest ETF manager, to compete more effectively with bigger rivals such as BlackRock and Vanguard. They also hoped the combination would enhance WisdomTree’s appeal to a potential acquirer. However, no buyer for the group appeared and the share price has fallen by about 38 per cent since the completion of the deal in April 2018.

Tuckwell, an Australian entrepreneur, said WisdomTree needed to focus on its core ETF business and that overhauling the board was necessary to address the “dismal” share price performance.

Tuckwell has also been infuriated by WisdomTree’s reinstatement of a complex “stockholder rights plan” — involving the issue of preference shares that lack voting rights — designed to block him from gaining control without having to pay a premium.

WisdomTree’s board has “repeatedly refused to have any meaningful dialogue or make any offer or proposal that might assist in reaching any form of settlement”, said Tuckwell.

He has also objected to WisdomTree’s decision to approve the expansion of its severance plan to include eight executives who together could collect up to an estimated $25mn if their contracts are terminated. Steinberg could walk away with an estimated $9mn under the severance plan, according to an adviser to Tuckwell.

Salerno, WisdomTree’s chair, said Tuckwell was “asking for a blank cheque” to change the board to suit his own personal agenda.

“Contrary to Mr Tuckwell’s misleading claims, WisdomTree’s strategy is clearly leading to strong performance results,” he said.