A battle is under way to control WisdomTree with the largest shareholder of the $ 77.7bn US asset manager demanding the chief executive should step down and new directors be appointed to the board.
Graham Tuckwell, the driving force behind the creation of the world’s first gold exchange traded fund, has teamed up with Lion Point, an activist hedge fund, in an effort to oust Jonathan Steinberg from his role as CEO at WisdomTree.
The dispute follows years of underperformance at WisdomTree which has seen its share price drop by 79 per cent from its peak in August 2015, even though it is frequently touted as a potentially attractive takeover target for a larger asset manager looking to expand or enter the rapidly growing $ 10tn ETF industry.
Tuckwell in 2005 founded ETF Securities, a London-based ETF specialist which sold its European arm to WisdomTree in a $ 611mn cash and shares deal in November 2017. Both parties believed the deal would strengthen the enlarged group – which was ranked as the world’s ninth largest ETF manager – and make it a more effective competitor to bigger rivals, such as BlackRock and Vanguard. They also hoped the combination would enhance its appeal to any possible buyer.
Steinberg told the FT in 2018 that he expected WisdomTree’s assets to reach $ 100bn without specifying a timeframe – a target that has not been reached.
Since the deal was completed, WisdomTree has registered net investor inflows of around $ 6.4bn but this has not been enough to defuse mounting tensions between Tuckwell, a blunt-speaking Australian entrepreneur, and Steinberg, the son of one of Wall Street’s most famous corporate raiders Saul Steinberg.
Tuckwell argues that Steinberg and his management team have destroyed half of WisdomTree’s market value, approximately $ 400mn, and is pressing for new directors to be voted on the board at the annual shareholder meeting in June.
Tuckwell, who is WisdomTree’s largest shareholder with an 18.7 per cent holding, has nominated himself for election to the board along with Lynn Blake, a former senior executive at the US asset manager State Street Global Advisors, and Deborah Fuhr, the founder of the consultancy ETFGI who is known as the “fairy godmother” of ETFs for her role in promoting the industry over three decades.
But Tuckwell’s ultimate goal is to force the departure of Steinberg, who founded WisdomTree as an investment magazine publisher and then oversaw its development into an ETF provider in 2006.
“WisdomTree needs a new CEO and enhanced board oversight to restore its lost credibility with stockholders,” Tuckwell said.
The asset manager has devised a sophisticated “poison pill” defense to ward off the attack.
Steinberg, who is married to the well-known US television business journalist Maria Bartiromo, is determined to fight. He has hired Bank of America as an advisor and constructed a complex “stockholder rights plan” – involving preference shares that lack voting rights being issued – designed to block Tuckwell and Lion Point from gaining control without having to pay a premium.
“We are committed to enhancing value for all stockholders and will continue to take actions that we believe will enable us to achieve this objective,” said a spokesperson for WisdomTree.
Lion Point, a hedge fund co-founded in 2015 by Didric Cederholm and Jim Freeman who both previously worked at Elliott Associates, has a 3.1 per cent holding in WisdomTree. Lion Point has been studying WisdomTree for three years and has interviewed more than 50 people, including former employees and potential acquirers. It has concluded that the “ineffective management culture” overseen by Steinberg must be addressed if the company is to thrive.