ETFS Capital and Lion Point Capital have jointly written an open letter to WisdomTree Investments, calling for a new CEO at the firm and nominating three candidates to the board to "reverse years of severe underperformance" and "restore WisdomTree's credibility".
ETFS Capital currently owns 10.4% of the common stock of WisdomTree, after ETF Securities sold its European and North American asset management businesses to WisdomTree, Legal & General Investment Management and Aberdeen Standard in 2018, and became ETFS Capital, while Lion Point Capital owns 3.1%.
The open letter revealed the two companies formed a group "after having independently reached similar conclusions about the significant opportunity to create value through actions within the control of the management and board of directors of WisdomTree".
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In the letter, ETFS Capital and Lion Point wrote: "We strongly believe that WisdomTree critically needs a new CEO, improved execution and enhanced board oversight to restore its lost credibility with stockholders.
"We firmly believe that the addition of highly qualified directors with relevant backgrounds and direct industry experience, can help identify and appoint a new CEO and guide WisdomTree so that it can regain its best-in-class company status in its industry while generating significant value for all stockholders."
The open letter, which is signed by Graham Tuckwell, founder and chair of ETFS Capital, and Didric Cederholm, CIO at Lion Point Capital, suggests the nomination of Tuckwell, ETFGI managing partner Deborah Fuhr, and former State Street Global Advisors CIO Lynn Blake for election at the 2022 WisdomTree annual meeting.
The letter highlighted the candidates' "extensive experience in overseeing and/or analyzing billions in value of ETF assets under management", as well as their "unquestionable industry knowledge".
"We note that two of our nominees have substantial experience in the European ETF market, where almost half the company's assets are located. This is a much-needed gap to be filled, as none of the board members appear to have any European ETF experience," the firms wrote.
ETFS Capital wrote that, at the time of the sale of its European ETC business to WisdomTree, it expected the company to be able to "create value for all stockholders without the need of a guiding hand and thus agreed, despite ETFS being the largest economic holder of the company by a large margin, not to have any representatives on the board".
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ETFS Capital and Lion Point go on to claim in the letter that WisdomTree had "squandered its credibility", with the "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", leading to more than $400m in value, or approximately 50% of its current market capitalisation, "destroyed" by the current management team and board.
The letter was issued on 18 March, with WisdomTree confirming receipt of the director nominations on the same day, stating that "stockholders are not required to take any action".
A few days earlier, on 14 March, WisdomTree announced the adoption of a limited duration stockholder rights plan "intended to protect WisdomTree and its stockholders from efforts by a single stockholder or group of stockholders to obtain control of WisdomTree without paying a control premium".
