The battle for control of WisdomTree intensified this week ahead of the US asset manager’s annual meeting on Friday when the demand by the largest shareholder for the removal of the chair and two other directors will face a vote by investors.
Three influential proxy advisers, Institutional Shareholder Services, Glass Lewis and Egan-Jones, which provide guidance on board votes and shareholder resolutions, have recommended that investors should vote against Frank Salerno, WisdomTree’s chair since October 2019 and a board director for 18 years.
The lengthy tenure of Salerno and two other directors raises questions about the independence of the board and its ability to hold WisdomTree’s management to account, according to the proxy advisers.
Defenestrating Salerno would remove a vital shield protecting Jono Steinberg, the company’s founder and chief executive who is under attack from Graham Tuckwell, the driving force behind the creation of the world’s first gold exchange traded fund.
Tuckwell, who owns 18.2 per cent of WisdomTree, is determined to oust Steinberg as chief executive of the company, which oversees assets of $93.6bn and is ranked as the world’s 14th largest exchange traded fund provider.
The dispute has been escalating 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.
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Tuckwell has been pushing for Steinberg’s removal since 2020, arguing that WisdomTree has failed to turn asset growth into improvements in profitability and returns to shareholders. He has repeatedly accused Steinberg and Salerno of overseeing the destruction of more than $1bn in shareholder value, a claim that the company denies.
The increasingly acrimonious battle between the two sides has been watched with astonishment by rivals in the ETF industry where arcane debates over detailed points of index construction are more normal talking points.
Steinberg, who is married to the high-profile financial television journalist Maria Bartiromo, plans to launch a blockchain-enabled digital assets platform this year. He believes the new platform, known as WisdomTree Prime, will provide a new competitive advantage for the company, which he founded as an investment magazine publisher in 1988 before overseeing its development into an ETF provider in 2006.
Tuckwell argues that Steinberg is squandering money on WisdomTree Prime and that the company should focus on its core fund management business that gathered net inflows of $12.2bn last year. That strong momentum has continued into 2023 with net inflows reaching $7.9bn so far this year, pushing assets under management to a record $93.6bn.
WisdomTree reported revenues of $301mn in 2022, down 1 per cent on the previous year while net income rose 1.8 per cent to $50.7mn over the same period.
Bruce Aust, a former vice-chair at Nasdaq, the exchange operator, and Tonia Pankopf, managing partner at Pareto Advisors, an investment management consultant, have been proposed as directors by Tuckwell who is also standing for election.
Both ISS and Glass Lewis have recommended that investors vote against Tuckwell’s election but suggest changes to the board are merited.
“Shareholders would benefit from more independent voices on the board to ensure oversight of strategy and execution, particularly as the company ramps up investments into digital, tokenisation and blockchain-enabled finance,” wrote ISS. It has recommended that investors support the election of both Aust and Pankopf.
Glass Lewis said that WisdomTree’s management had provided a “compelling defence” of the company’s strategy and recent performance but it was “difficult to overlook” some of the issues highlighted by Tuckwell, which had affected shareholder returns. It recommended that investors should vote for Pankopf as a replacement for Salerno as chair.
Both Tuckwell and Steinberg appear determined to continue their fight. WisdomTree’s letter to shareholders this week noted that a change of control at the top of the company would only occur if a majority of the board was replaced and this provision would not be triggered even if all three of Tuckwell’s nominees were approved by shareholders.
Additional reporting by Madison Darbyshire
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