ETFS Capital, an activist investor with a 10% stake in WisdomTree, a notable asset management company based in New York, has taken significant steps to amplify its ongoing disagreement with the firm regarding its strategic direction.
According to a recent letter by ETFS Capital, this escalation marks a pivotal moment in their dispute, leading ETFS Capital to launch a “withhold campaign.” This initiative is aimed at WisdomTree’s wider shareholder base, encouraging them to abstain from voting for certain board members at the forthcoming annual shareholder meeting. The move underscores the deepening rift over the asset manager’s strategic choices and operational performance.
ETFS Capital criticizes WisdomTree strategy, launches 'withhold campaign' vs board https://t.co/alKuxzyphI pic.twitter.com/VWdlLxFucC
— Reuters Business (@ReutersBiz) March 21, 2024
Concerns Over Strategic Decisions
ETFS Capital has voiced concerns over several strategic decisions taken by WisdomTree, particularly criticizing the company’s allocation of resources, increased operational expenses, and its recent foray into the Decentralized Finance (DeFi) space through blockchain technology.
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Moreover, according to ETFS Capital, these strategies have not delivered optimal returns for investors. Despite a commendable 32% increase in WisdomTree’s stock year-to-date as of March 21, 2024, ETFS Capital argues that a significant “value gap” remains, suggesting that with optimized operational strategies, the stock value could potentially rise by at least 70%, reaching an impressive $15.50 per share.
Attempts at Private Communication
In a letter dated March 21st, Graham Tuckwell, the chairman of ETFS Capital, revealed that previous attempts to engage privately with WisdomTree’s management were unsuccessful. Proposals made in February 2024, which included engaging an investment bank to explore strategic alternatives, returning capital to shareholders, and replacing certain executives, were publicly rejected by WisdomTree. This rejection has prompted ETFS Capital to shift its focus towards mobilizing WisdomTree’s broader shareholder base in support of its campaign.
The “withhold campaign” initiated by ETFS Capital aims to express shareholder dissatisfaction by encouraging investors not to vote for board members seeking re-election without opposition. This strategy is intended to highlight the disagreement with the current strategic direction of WisdomTree and pressure the board to reconsider its approach. ETFS Capital’s influence was previously demonstrated in 2023 when it successfully advocated for the election of two candidates it proposed, showcasing its ability to influence shareholder opinion.
