WisdomTree is facing a revolt from its biggest shareholder over the firm's "dismal performance", which is attempting to topple its CEO and chair.
Graham Tuckwell is chair of ETFS Capital, which holds an 18.3% stake in the firm, and accused the firm of failing to provide necessary management oversight, resulting in "massive stockholder value destruction".
In a letter to WisdomTree's board yesterday (12 April), Tuckwell noted that since the firm acquired the ETFS ETC business in 2018, its total stockholder return had been -34%, compared to a positive return of 34% for the Russell 2000 index and 51% for ETF provider BlackRock.
He argued the firm had "repeatedly refused to engage" since last year, noting ETFS had made various suggestion to improve operations and decision making at the firm.
Instead, WisdomTree has reinstated its stockholder rights plan, which he described as a "poison pill" and further enhanced its "already generous" executive severance plan, which Tuckwell described as "the actions of a board [which] is afraid to be held to account by its stockholders".
The firm's executive severance plan would allow eight executives to receive up to $25m if their contracted are terminated, with the firm's CEO Jonathan Steinberg receiving $9m alone.
Tuckwell instead argued WisdomTree needed "a new plan, with improved execution and greatly enhanced board oversight".
This would mean focusing on achieving operational efficiency and its core ETF business, while re-evaluating "all capital allocation decisions" including WisdomTree Prime, he said.
Unveiled in January last year, WisdomTree Prime is a digital wallet that allows users to invest in digital assets, such as cryptocurrency or blockchain products.
Tuckwell pointed to three directors he saw as undermining attempts to change the firm: Frank Salerno (chair of the board and compensation committee), Win Neuger (chair of the nominating and governance committee), and Anthony Bossone (chair of the audit committee).
In a response to Tuckwell's letter yesterday, WisdomTree chair Salerno said Tuckwell was attempting to "take control" of the firm by demanding the resignation of the directors.
Salerno said the firm viewed the demands as "unjustified and an unwarranted risk to our stockholders", adding the board had seen a "significant level" of refreshment in recent years.
He accused Tuckwell of asking for "a blank check to change the composition of the board to suit his own preferences" and that he was putting "his own personal agenda above the interests of all WisdomTree stockholders".
In his letter, Tuckwell said the board needed "further change (but not by way of individuals cherry-picked by the long-tenured directors)".
He said ETFS would be nominating "three highly qualified director candidates" - Bruce Aust, Tonia Pankopf and himself - at WisdomTree's annual general meeting later this year.
"We strongly believe that these individuals, if elected, would bring much-needed governance, capital allocation and operational expertise, as well as a stockholder perspective to WisdomTree's boardroom," he concluded.
This week, UBS upgraded WisdomTree to ‘buy' and raised the firm's 12-month share price target to $8 from $6.
