ETFS Capital Files Preliminary Proxy Statement For The Election Of Three Highly-Qualified Candidates To Wisdomtree, Inc. Board Of Directors

$WT

Dear Fellow Stockholders,

ETFS Capital is the largest stockholder in the Company, with over $180 million of our own capital invested in WisdomTree. Our ownership interest is significantly higher than the entire Board combined, including WisdomTree’s Founder & CEO, Jonathan Steinberg. Given such high stakes, we are deeply concerned with the Company’s inability to deliver stockholder value and the failure of its long-tenured directors – Frank Salerno and Win Neuger – to provide necessary Board oversight.

Last year, we gave two detailed presentations to WisdomTree with the expectation that it would prompt the Company into taking much needed action. We are extremely disappointed at the lack of progress. Instead, Frank Salerno (Board Chair and Chair of the Compensation Committee) and Win Neuger (Chair of the Nominating and Governance Committee (the “NGC”)) have seemingly focused on consolidating their control over the Board, rewarding the CEO with lavish compensation packages despite repeated failures to create stockholder value, and stifling new voices on the Board under the guise of “board refreshment.”

We encourage stockholders to consider the following facts:

1.Turnover of “New” Directors: Among the most alarming of recent developments at the Company is the fact that two recently appointed female directors have left the Board within the last ten months. Susan Cosgrove, who joined the Board in April 2019, resigned in September 2022 after just over three years of service.

Even more egregiously, the Company has decided that Deborah Fuhr, who joined the Board in May 2022 as part of our cooperation agreement with WisdomTree, will not be nominated to stand for election at the Annual Meeting. Previously, Ms. Fuhr served as Managing Director and Global Head of ETF Research and Implementation Strategy at BlackRock, Inc.

Ms. Fuhr was and remains extremely qualified to serve as a director of the Company and, in fact, was named by Financial News as one of the “Twenty Most Influential in Fund Management 2023” [1], who noted that: “[i]f anyone can be said to be synonymous with exchange traded funds, it is Deborah Fuhr. She has been involved in the industry in Europe from inception, leading the ETF business at Morgan Stanley before moving to Barclays Global Investors in 2008, just before it was acquired by BlackRock — a move that doubled the US fund manager’s assets”.

The Company also acknowledges Ms. Fuhr’s extensive ETF experience and qualifications to sit on the Board, noting in last year’s proxy statement that: “Ms. Fuhr’s qualifications to serve on the Board of Directors include her global ETF, investment and fund management markets experience, and her experience consulting in the ETF sector.”

Given the fact that Ms. Fuhr is not only highly-qualified, but also a member of the NGC, we question WisdomTree’s rationale for not renominating a true ETF expert to the Board after less than one year of service. The Company provides no substantive answer for this baffling decision and instead merely states in its 2023 preliminary proxy statement that “[t]he Board of Directors determined, upon the recommendation of the Nominating and Governance Committee, that Ms. Fuhr not be included in the Board’s slate of nominees for the Annual Meeting.”

Considering Ms. Fuhr’s exceptional credentials and unparalleled expertise in the ETF space (something which is sorely lacking on the Board) the only conclusion we can reach is that the Board had no intention of ever honoring the spirit of the cooperation agreement. Instead, it appears to us that they have simply paid meager lip service to her tenure on the Board since May 2022 and have now removed her at the first possible opportunity.

We believe stockholders should question the Board’s poor track record and lackluster support of highly qualified female directors and whether there has been a deliberate effort to stifle such voices.

2.Questionable Director Replacement:

Even more suspicious than Ms. Fuhr’s hasty removal and the unexplained loss of credible expertise in the ETF space is the Board’s selection of a replacement candidate, Shamla Naidoo. According to WisdomTree’s preliminary proxy statement, Ms. Naidoo qualifications include “expertise in cybersecurity and digital innovation and her experience serving on a public company board of directors”. Considering Ms. Naidoo’s experience is primarily in cybersecurity and IT, an expertise typically covered by the Chief Information Security Officer (CISO) and the fact she has zero ETF or related industry experience, we question the Board’s rationale for adding her as the newest director candidate.

Notwithstanding her lack of relevant experience, of further concern is Ms. Naidoo’s track record as the CISO of Starwood Hotels. In 2018, Marriott International – parent company of Starwood Hotels – reported that “there had been unauthorized access to the Starwood network since 2014”², that impacted over 500 million guest records. Ms. Naidoo served as the CISO of Starwood at that time. Subsequently, Marriott International was fined $24 million by UK’s Information Commissioner’s Office (ICO) in addition to facing numerous class action law suits.

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¹ Source: Financial News: https://www.fnlondon.com/lists/twenty-most-influential-in-fund-management-2023/deborah-fuhr

² Source: https://news.marriott.com/news/2018/11/30/marriott-announces-starwood-guest-reservation-database-security-incident. See Marriott International’s FY2020 10-K filing for more details.

It is clear that Ms. Naidoo has no ETF experience yet is proposed to replace an ETF industry expert with impeccable credentials in Ms. Fuhr. Additionally, Ms. Naidoo has no real public board experience. Her only stated public company board experience is serving as a director of StoneBridge Acquisition Corporation, a SPAC with no business operations. Given the Company’s extensive track record in stockholder value destruction – a trend which has persisted for a long time – we question the suitability of nominating such a candidate at a time when the Company faces increased stockholder scrutiny around long-term financial performance, strategy, board composition, and execution.

3.Control of Key Committees by Long-Tenured Directors: According to WisdomTree’s preliminary proxy statement, “the Board proactively added five new independent and diverse directors” since 2021. Interestingly, none of the new directors have been awarded any leadership positions on key committees. For instance, Anthony Bossone (board tenure of 14 years) chairs the Audit Committee, Win Neuger (board tenure of 10 years) chairs the Nominating and Governance Committee and Frank Salerno (board tenure of almost 18 years) chairs the Compensation Committee. We question the rationale for not assigning new directors leadership roles on key Board committees.

4.Pay-for-Performance Disparity: Frank Salerno has served as a director since 2005 – almost 18 years. He has been the Chair of the Board (previously Lead Independent Director) and the Chair of the Compensation Committee since 2018. Over this period, the Founder/CEO led management team has destroyed $921 million in market cap³. Instead of holding the CEO accountable, the Compensation Committee under Mr. Salerno’s leadership awarded the CEO more than $21 million in compensation.

5.Misguided Criticism of Largest Stockholder:

Beyond being the largest stockholder of WisdomTree, ETFS Capital has a track record of success in the ETF space, particularly in driving stockholder value through operational, financial, strategic, and governance enhancements. Graham Tuckwell, the founder and Executive Chairman of ETFS Capital, is regarded as one of the most successful independent ETF operators globally, having created over $1 billion of enterprise value since the company’s launch.

This prowess led WisdomTree’s CEO Jonathan Steinberg to pursue a transaction with ETFS Capital. When the companies announced that WisdomTree would be acquiring the European ETC business in 2018 for $611 million, CEO Steinberg acknowledged that:

“ETF Securities is Europe's leading commodity franchise with nearly $18 billion of assets under management, including $11 billion in gold, which nicely complements our existing exposures. They were first-to-market and are market share leaders in gold and numerous other precious metals and commodity categories.

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³ Source: Factset. Company Filings. Estimated as the change in total Market Value of WisdomTree stock from the end of 2017 ($1.7 billion) to the end of 2022 ($798.5 million). Total CEO reported pay for years 2018 – 2022.

…WisdomTree will jump to the ninth largest ETF provider in Europe, will be immediately profitable and better positioned to leverage the enhanced resources of the combined entity.

… we anticipate this deal will be at least 25% accretive to earnings immediately.”

- Jonathan Steinberg, November 13, 2017

ETFS Capital has repeatedly offered ideas and support as part of a good faith effort to help the Company deliver on the promises made by CEO Steinberg to stockholders – promises that he has been unable to fulfill. We have sought change and accountability in a collaborative spirit which has only been met with hostile maneuvers, anti-stockholder actions, and now disparaging comments about the candidacy of Graham Tuckwell. Mr. Tuckwell has delivered for his clients and stakeholders, and it is time that Mr. Steinberg be held accountable for his underperformance and his inability to deliver for WisdomTree’s stockholders.

We believe that WisdomTree needs a new plan, with improved execution and greatly enhanced Board oversight. Specifically, we believe WisdomTree needs to focus on achieving operational efficiency, focus on its core ETF business, and re-evaluate all capital allocation decisions including WT Prime.

We firmly believe that with the right Board in place, WisdomTree can be a best-in-class company in its industry and generate significant value for all stockholders.

It is clear to us that the Board needs true change – not by way of individuals cherry-picked by the long-tenured directors – to trigger the actions urgently required to address the dismal performance of the Company. We recently sought to engage with the Board in a constructive dialogue on this matter to reach a mutually agreeable resolution to avoid a proxy contest in 2023, but the Company has repeatedly refused to have any meaningful dialogue or make any offer or proposal that might facilitate any form of settlement.

Yours truly,

Graham Tuckwell
Executive Chairman
ETFS Capital Limited

Source:

https://www.sec.gov/Archives/edgar/data/880631/000092189523000933/dfan14a13246002_04242023.htm