What changed in this filing

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Item 1A. Risk Factors

2021-02-19 compared with 2020-02-28 · 129 added, 100 removed, 299 unchanged (43% of the section changed)

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See the section entitled “Cautionary Note Regarding Forward-Looking Statements.”

Adverse market developments arising from the COVID-19

pandemic could negatively impact our assets under management, or AUM, resulting in a decline in our revenues and other potential operational challenges.

Global financial markets experienced a significant decline at the onset of the COVID-19

While the markets have since recovered, the ultimate duration of the pandemic and its short-term and long-term impact on the global economy is unknown.

Mutations in the virus, a setback in vaccine distribution and negative global economic consequences arising from the pandemic, amongst other factors, could have a future adverse impact on the global financial markets.

Negative market reactions could negatively impact our AUM and our revenues.

In addition, many of the key service providers we rely on are working remotely.

If they were to experience material disruptions in the ability for their employees to work remotely, such as disruptions in internet-based communications systems and networks or the availability of essential goods and services such as food or power, our ability to operate our business normally could be materially adversely disrupted.

Similarly, to date our own employees and, we believe, the employees of our key service providers, have not experienced a material degree of illness due to COVID-19.

If our or their workforces, or key components thereof, were to experience significant illness, our ability to operate our business normally could be materially adversely disrupted.

Any such material adverse disruptions to our business operations could have a material adverse impact on our results of operations or financial condition.

Declining prices of securities, gold and other precious metals and other commodities can adversely affect our business by reducing the market value of the assets we manage or causing WisdomTree ETP investors to sell their fund shares and trigger redemptions.

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The financial markets are highly volatile and prices for financial assets may increase or decrease for many reasons, including general economic conditions, trade uncertainties, rising or falling interest rates, the strengthening or weakening of the U.S.

dollar, political events, acts of terrorism and other matters beyond our control.

dollar, events such as the COVID-19

pandemic, political events, acts of terrorism and other matters beyond our control.

Substantially all our revenues are derived from advisory fees earned on our AUM, in both the international and U.S.

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We derive a substantial portion of our revenues from a limited number of products and, as a result, our operating results are particularly exposed to investor sentiment toward investing in the products’ strategies and our ability to maintain the AUM of these products, as well as the performance of these products.

At December 31, 2019, approximately 54% of our global AUM was concentrated in ten of our WisdomTree ETPs with approximately 22% in three of our gold products, 19% in four of our domestic equity ETFs, 10% in HEDJ and DXJ and 3% in one of our emerging markets ETFs.

At December 31, 2020, approximately 53% of our global AUM was concentrated in ten of our WisdomTree ETPs with approximately 27% in four of our precious metal products, 15% in three of our domestic equity ETFs, 8% in two of our emerging markets ETFs and 3% in HEDJ.

As a result, our operating results are particularly exposed to the performance of these funds and our ability to maintain the AUM of these funds, as well as investor sentiment toward investing in the funds’ strategies.

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Market conditions that are not conducive to investment in precious metals may lead to declining prices that are linked to our ETPs and thereby adversely affect our AUM and revenues.

We can also provide no assurance our products backed by precious metals will benefit from favorable market conditions.

We cannot provide any assurance that our products backed by precious metals will benefit from favorable market conditions.

In addition, changes in long-term demand cycles for commodities generally and cyclicality in demand for commodities as an investment asset, could reduce demand for certain of our products, limit our ability to successfully launch new products and also may lead to redemptions by existing investors.

Also, a portion of the advisory fee revenues we receive on our ETPs backed by gold are paid in gold ounces.

In addition, we pay gold ounces to satisfy our deferred consideration obligation that we assumed in connection with the ETFS Acquisition (See Note 12 to our Consolidated Financial Statements).

In addition, we pay gold ounces to satisfy our deferred consideration obligation (See Note 12 to our Consolidated Financial Statements).

While we may readily sell the gold that we earn under these advisory contracts, we still may maintain a position.

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We compete based on a number of factors, including name recognition, service, investment performance, product features, breadth of product choices and fees.

In addition, in September 2019, the SEC approved the ETF Rule, which removes the need to file for exemptive relief in order to issue ETFs thereby creating fewer barriers to entry for competitors.

In addition, the adoption of the ETF Rule removed the need to file for exemptive relief in order to issue ETFs, thereby creating fewer barriers to entry for competitors.

We expect that additional companies, both new and traditional asset managers, will continue to enter the ETP space.

Also, during 2019, the SEC approved multiple proposals for non-transparent

Also, the SEC has approved multiple proposals for non-transparent

active ETFs, which are products that are not required to disclose their holdings daily, as most ETFs currently are required to do.

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Several ETP sponsors with whom we directly compete continue to migrate toward offering low and no fee products targeting gains in market share.

Price competition exists in not only commoditized product categories such as traditional, market capitalization weighted index exposures, but also in fundamental or other non-market

capitalization weighted or factor-based exposures.

Price competition exists in not only commoditized product categories such as traditional, market capitalization weighted index exposures and commodities, but also in non-market

capitalization weighted or factor-based exposures and commodities.

Fee reductions by certain of our competitors has been a trend over the last few years and continues to persist and many of our competitors are well positioned to benefit from this trend.

Certain larger competitors are able to offer products at lower price points or otherwise as loss leaders due to other revenue sources available within such competitor that are unavailable to us.

Funds are being offered with fees of 20 bps or less, which have attracted approximately 76% of the net flows globally during the last three years.

Newer players have also been entering the ETP industry and frequently seek to differentiate by offering ETPs at a lower price point.

Funds are being offered with fees of 20 basis points or less, which have attracted approximately 84% of the net flows globally during the last three years.

Fee reduction by certain of our competitors has been a trend over the last few years and continues to persist and many of our competitors are well positioned to benefit from this trend.

Our competition may have greater market share, offer a broader range of products and have greater financial resources than we do.

Some financial institutions operate in a more favorable regulatory environment and/or have proprietary products, sources of revenue and distribution channels, which may provide them and their investment products with certain competitive advantages, including in pricing ETFs as loss leaders.

Further consolidation within the industry may also put us at a competitive disadvantage.

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We rely on various third-party distribution channels, including registered investment advisors, wirehouse and institutional channels to sell our products.

Increasing competition, a failure to maintain business relationships

and other factors could impair our distribution capabilities and increase the cost of conducting business.

Increasing competition, a failure to maintain business relationships and other factors could impair our distribution capabilities and increase the cost of conducting business.

In addition, several of the largest custodial platforms and online brokerage firms recently announced their decision to eliminate trading commissions for ETFs.

Our arrangements with these platforms had offered us preferred or exclusive access for our products, enabling investors to purchase ETFs without paying commissions.

Our arrangements with these platforms had offered us preferred or exclusive access for our products, enabling investors to purchase our products without paying commissions.

Exclusivity is no longer available, and we can provide no assurance that access to new opportunities will arise.

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As a result, we may further adjust our product offerings, which may result in the closing of some of our ETPs, changing their investment objective or offering of new funds.

The investment performance of our funds is important to our success.

While strong investment performance could stimulate sales of our ETPs, poor investment performance, on an absolute basis or as compared to third-party benchmarks or competitive products, could lead to a decrease in sales or stimulate redemptions, thereby lowering the AUM and reducing our revenues.

The investment performance of our products is important to our success.

AUM and reducing our revenues.

Our fundamentally-weighted equity products are designed to provide the potential for better risk-adjusted investment returns over full market cycles and are best suited for investors with a longer-term investment horizon.

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Unless such initiatives result in an increase in our revenues that is at least proportionate to the increase in the costs associated with implementing them, our future profitability will be adversely affected.

In addition, any future strategic transactions may result in the issuance of a significant amount of our common stock or other securities that could be dilutive to our stockholders, make substantial borrowings and/or changes in our board composition and/or management team, that constitute a change of control of our Company, lead to significant changes in our product offering, business operations and earning and risk profiles, and/or result in a decline in the price of our common stock.

In addition, any future strategic transactions may result in the issuance of a significant amount of our common stock or other securities that could be dilutive to our stockholders, require substantial borrowings, result in changes in our board composition and/or management team that constitute a change of control of our Company, lead to significant changes in our product offering, business operations and earning and risk profiles, and/or result in a decline in the price of our common stock.

Our ability to complete future strategic transactions depends upon a number of factors that are not entirely within our control, including our ability to identify suitable merger or acquisition candidates, negotiate acceptable terms, conclude satisfactory agreements and secure financing.

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The uncertainty regarding the U.K.’s exit from the EU could adversely affect our business.

left the EU on January 31, 2020, referred to as Brexit, subject to transitional arrangements which will govern the relationship between the U.K.

and the remaining member states until the end of 2020.

Such an exit from the EU is unprecedented, and it is currently unclear what the U.K.’s trading relationship with the EU will be after the expiry of the transitional arrangements.

Notwithstanding the uncertainty around the precise structure of the future EU/U.K.

relationship, it can be assumed that there will be changes to current U.K.

trading relationships and the U.K.

legal and regulatory environment.

left the EU on January 31, 2020, referred to as Brexit, subject to transitional arrangements which ended on December 31, 2020.

The transition period ended with arrangements in place between the U.K.

and the Member States of the EU.

Such an exit from the EU is unprecedented and the medium to long-term consequences for our business remain uncertain.

Among other things, the U.K.’s departure from the EU could lead to instability, including volatility, in the foreign exchange markets.

Deteriorating business, consumer or investor confidence could lead to (i) reduced levels of business activity, (ii) higher levels of default rates and impairment and (iii) mark to market losses in trading portfolios resulting from changes in credit ratings, share prices and solvency of counterparties.

These changes may impact how we conduct our business across Europe.

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portfolio management services, custodial, fund accounting and administration services or index calculation services, to continue to provide these necessary services to us, even though they may also have disaster recovery plans to address these contingencies.

In addition, a failure of the stock exchanges

on which our products trade to function properly could cause a material disruption to our business.

In addition, a failure of the stock exchanges on which our products trade to function properly could cause a material disruption to our business.

If we or our third-party vendors are unable to respond adequately or in a timely manner, these failures may result in a loss of revenues and/or increased expenses, either of which would have a material adverse effect on our operating results.

Third Party Risks

We currently depend on State Street Bank and Trust Company to provide us with critical administrative services to operate our business and the WisdomTree ETFs.

The failure of State Street to adequately provide such services could materially affect our operating business and harm WisdomTree ETF shareholders.

We currently depend upon State Street Bank and Trust Company, or State Street, to provide the WisdomTree Trust with custody services, fund accounting, administration, transfer agency and securities lending services.

The failure of State Street to successfully provide us and the WisdomTree ETFs with these services could result in financial loss to us and WisdomTree ETF shareholders.

We currently depend on State Street Bank and Trust Company to provide us with critical administrative services to operate our business and our products.

The failure of State Street to adequately provide such services could materially affect our operating business and harm investors in our products.

We currently depend upon State Street Bank and Trust Company, or State Street, to provide custody services, fund accounting, administration, transfer agency and securities lending services.

The failure of State Street to successfully provide us and our products with these services could result in financial loss to us and investors in our products.

In addition, because State Street provides a multitude of important services to us, changing this vendor relationship would be challenging.

It might require us to devote a significant portion of management’s time to negotiate a similar relationship with another vendor or have these services provided by multiple vendors, which would require us to coordinate the transfer of these functions to another vendor or vendors.

We currently primarily depend on BNY Mellon and Voya Investment Management to provide portfolio management services and other third parties to provide many critical services to operate our business and the WisdomTree ETFs.

The failure of key vendors to adequately provide such services could materially affect our operating business and harm WisdomTree ETF shareholders.

The failure of key vendors to adequately provide such services could materially affect our operating business and harm investors in our products.

We depend on third-party vendors to provide us with many services that are critical to operating our business, including BNY Mellon and Voya Investment Management as sub-advisers

that provide us with portfolio management services, third-party providers of index calculation services for our indexes, a distributor of the WisdomTree ETFs and a third-party provider of indicative values of the portfolios of the WisdomTree ETFs.

The failure of any of these key vendors to provide us and the WisdomTree ETFs with these services could lead to operational issues and result in financial loss to us and WisdomTree ETF shareholders.

We currently depend on R&H Fund Services (Jersey) Limited in respect of the products issued by the ManJer Issuers, APEX IFS Limited in respect of the products issued by WMAI and State Street Fund Services (Ireland) Limited in respect of the WisdomTree UCITS ETFs to provide us with critical administrative services to those products.

that provide us with portfolio management services, third-party providers of index calculation services for our indexes, a distributor of our products and a third-party provider of indicative values of the portfolios of our products.

The failure of any of these key vendors to provide us and our products with these services could lead to operational issues and result in financial loss to us and investors in our products.

We currently depend on HSBC and JP Morgan to provide us with critical physical custody services for precious metals that back our ETCs.

The failure of HSBC and JP Morgan to adequately safeguard the physical assets could materially adversely affect our business and harm investors in our products.

Certain products are backed by physical metal and are subject to risks associated with the custody of physical assets, including the risk that access to the metal held in the secure facilities managed by HSBC and JP Morgan could be restricted by a pandemic (such as the COVID-19

pandemic), natural events (such as an earthquake) or human actions (such as a terrorist attack).

In addition, there is a risk that the physical metal could be lost, stolen, damaged or restricted.

The failure of HSBC and JP Morgan to successfully provide us with these services could result in financial loss to us and investors in our products and our recovery of any losses from a custodian, sub-custodian

or insurer may be inadequate.

We currently depend on Swissquote Bank Ltd to provide us with critical custody services for digital currencies that back WisdomTree Bitcoin securities and recently entered into a custody agreement with Coinbase Custody Trust LLC to also provide such services.

The failure of Swissquote and, when effective, Coinbase, to adequately safeguard these digital assets could materially adversely affect our business and harm investors in this product.

Products that are backed by digital currencies such as WisdomTree Bitcoin securities are subject to the risks associated with the custody of digital assets, including the risk that the digital currencies or the blockchain infrastructure could be impacted by hacks or other malicious actions.

WisdomTree Issuer X Limited is reliant on the security procedures and infrastructure of the custodian to safeguard the underlying digital currency cryptographic keys.

There is no guarantee that the arrangements of the custodian will fully protect from loss of assets.

Damage to the infrastructure or loss of these assets may render the digital currency inaccessible and adversely impact the value of an investment in digital securities.

The digital currencies may also be exposed to the Internet briefly before reaching the secure accounts of the custodian.

There are additional risks involved with an investment backed by digital currencies such as changes to the protocol (such as forks) which could damage the reputation of digital assets or result in losses for investors.

The risks associated with digital currencies and the failure of the custodian to safeguard the underlying assets could result in financial loss to us and investors in our products and our recovery of any losses from a custodian may be inadequate.

WisdomTree Issuer X Limited also has entered into a custody agreement with Coinbase Custody Trust LLC.

WisdomTree Issuer X Limited will make a regulatory announcement to confirm an effective date when it will start to use Coinbase.

Following the effective date, WisdomTree Issuer X Limited also will become reliant on the procedures and infrastructure of Coinbase for critical custody services for digital currencies.

There is no guarantee that the arrangements with Coinbase will fully protect from the loss of assets.

The failure of Coinbase to safeguard the underlying assets could result in financial loss to us and investors and recovery of any losses may be inadequate.

We currently depend on R&H Fund Services (Jersey) Limited in respect of the products issued by the ManJer Issuers (except WisdomTree Issuer X Limited), JTC Trust Company Jersey in respect of WisdomTree Issuer X Limited, APEX IFS Limited in respect of the products issued by WMAI and State Street Fund Services (Ireland) Limited in respect of the WisdomTree UCITS ETFs to provide us with critical administrative services to those products.

The failure of any of those providers to adequately provide such services could materially affect our operating business and harm investors in those products.

We currently depend upon R&H Fund Services (Jersey) Limited in respect of the products issued by the ManJer Issuers, APEX IFS Limited in respect of the products issued by WMAI and State Street Fund Services (Ireland) Limited in respect of the WisdomTree UCITS ETFs, to provide fund accounting, administration and, transfer agency services, as well as custody services in the case of the WisdomTree UCITS ETFs.

We currently depend upon R&H Fund Services (Jersey) Limited in respect of the products issued by the ManJer Issuers (except WisdomTree Issuer X Limited), JTC Trust Company Jersey in respect of WisdomTree Issuer X Limited, APEX IFS Limited in respect of the products issued by WMAI and State Street Fund Services (Ireland) Limited in respect of the WisdomTree UCITS ETFs, to provide fund accounting, administration and, transfer agency services, as well as custody services in the case of the WisdomTree UCITS ETFs.

The failure of any service provider to successfully provide these services could result in financial loss to the products, us and investors in those products.

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or Irish Life Investment Managers Limited to provide portfolio management services and other third parties to provide many critical services to operate the WisdomTree UCITS ETFs.

The failure of key vendors to adequately provide such services could materially affect our operating business and harm WisdomTree UCITS ETFs’ shareholders.

The failure of key vendors to adequately provide such services could materially affect our operating business and harm investors in the WisdomTree UCITS ETFs.

The WisdomTree UCITS ETFs depend on third-party vendors to provide many services that are critical to operating our business, including Assenagon Asset Management S.A.

and Irish Life Investment Managers Limited as investment managers that provide us with portfolio management services and third-party providers of index calculation services.

The failure of any of these key vendors to provide the WisdomTree UCITS ETFs with these services could lead to operational issues and result in financial loss to us and shareholders of WisdomTree UCITS ETFs.

The failure of any of these key vendors to provide the WisdomTree UCITS ETFs with these services could lead to operational issues and result in financial loss to us and investors in the WisdomTree UCITS ETFs.

The products issued by our European business are subject to counterparty risks.

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The products issued by our European business depend on the services of counterparties, custodians and other agents and are thus subject to a variety of counterparty risks, including the following:

Products issued by the ManJer Issuers are backed by physical metal and are subject to risks associated with the custody of metal, including the risk that access to the physically backed metal held in the vaults or secure warehouses of a custodian or sub-custodian

Products issued by the ManJer Issuers (except WisdomTree Issuer X Limited) are backed by physical metal and are subject to risks associated with the custody of metal, including the risk that access to the physically backed metal held in the vaults or secure warehouses of a custodian or sub-custodian

could be restricted by natural events, such as an earthquake, or human actions, such as a terrorist attack, the risk that such physically backed metal in its custody could be lost, stolen or damaged, and the risk that our recovery of any losses from a custodian, sub-custodian

or insurer may be inadequate.

Products issued by WisdomTree Issuer X Limited are backed by digital currencies and are subject to risks associated with the custody of digital assets, including the risk that the digital currency itself or the relevant blockchain infrastructure could be threatened by hacks, other malicious actions, breakdown or disturbance of the infrastructure and loss of the digital keys.

Products issued by WMAI, certain WisdomTree UCITS ETFs and certain products issued by the ManJer Issuers are backed by swap, derivative or similar arrangements are subject to risks associated with the creditworthiness of their counterparties, including the risk that a counterparty will not settle a transaction in accordance with its terms and conditions because of a dispute over the terms of the relevant arrangement (whether or not bona fide) or because of a credit, liquidity, regulatory, tax or operational problem.

Any deterioration of the credit or downgrade in the credit rating of a counterparty, or the custodian holding the collateral, could cause the associated products to trade at a discount to the value of the underlying assets.

Not all of our arrangements with counterparties of our products issued by the ManJer Issuers are collateralized.

Products issued by WisdomTree Oil Securities Limited, or OSL, are backed by futures swaps purchased from an affiliate of the Royal Dutch Shell Company, or Shell.

In the event of default under these purchased swaps, OSL would have only unsecured claims against Shell with no recourse to collateral.

The terms of contracts with counterparties are generally complex, often customized and often not subject to regulatory oversight.

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Any losses due to a counterparty’s failure to perform its contractual obligations will be borne by the relevant product issuer and there could be a substantial delay in recovering assets due from counterparties or it may not be possible to do so at all.

Defaults by, or even rumors or questions about, the solvency of counterparties

may increase operational risks or transaction costs, which may negatively affect the investment performance of the relevant products and have a material adverse effect on our business and operations.

Any products that have the benefit of collateral are subject to counterparty risk associated with the quality and the extent of the collateral received

Products backed by swap, derivative or similar arrangements are also subject to risks associated with the quality of the collateral that our issuers receive, if any, under credit support arrangements, repurchase transactions or other similar arrangements.

For example, collateral received by an issuer may not be of sufficient value to cover all amounts payable to holders of the relevant products upon their redemption for a variety of reasons, including that the enforcement of the right to the collateral may have resulted from its counterparty failing to post collateral with sufficient value to cover any exposure under corresponding swaps, that the market value of such collateral had subsequently declined or that such exposure had increased due to market conditions.

In addition, collateral is generally posted with reference to the value of outstanding exposure as at the previous day’s close, therefore presenting a risk that subsequent market movements in the prices of the underlying swaps may render the previously posted collateral inadequate.

Although the substantial majority of our contracts are over-collateralized, there can be no assurance that the prescribed collateral levels will be sufficient to address these risks.

Defaults by, or even rumors or questions about, the solvency of counterparties may increase operational risks or transaction costs, which may negatively affect the investment performance of the relevant products and have a material adverse effect on our business and operations.

Certain of our European listed products are subject to counterparty risks.

Failure of the counterparties to fulfill their obligations could negatively impact our products and AUM, which could adversely affect our business.

Certain of our European listed products depend on the services of counterparties.

The terms of contracts with counterparties are generally complex, frequently customized and often not subject to regulatory oversight, and are thus subject to a variety of risks, including the following:

Counterparty risk

– certain products are backed by swap, derivative or similar arrangements and are subject to risks associated with the creditworthiness of their counterparties;

– a counterparty may not settle a transaction in accordance with its terms and conditions because of a dispute over the terms of the relevant arrangement (whether or not bona fide), a default (whether or not bona fide), or because of a credit, liquidity, regulatory, tax or operational problem;

These products are dependent on receipt of payments from such counterparties in order to satisfy payment obligations to investors.

Any shortfall in the amounts received from counterparties, a voluntary or involuntary default by a counterparty, failure of the counterparty to perform its contractual obligations due to market stress or otherwise, or deterioration of the credit rating of a counterparty could result in:

losses for investors and the potentially limited ability to recover losses;

a compulsory redemption or other termination of the relevant products which may be earlier and at a different price to that which investors may receive had their investment not been redeemed or otherwise terminated;

the associated products trading at a discount to the value of the underlying assets;

the imposition of temporary restrictions on creation and redemption activity in the primary market in accordance with applicable product documentation.

Such actions may impact the operation and liquidity of these products in the secondary market on exchange and the products may trade at a discount or premium;

increased operational risks or transaction costs, which may negatively affect the investment performance of the relevant products and have a material adverse effect on our business and operations.

Our risk management policies and procedures, and those of our third-party vendors upon which we rely, may not be fully effective in identifying or mitigating risk exposure, including employee misconduct.

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Although we maintain insurance and use other traditional risk-shifting tools, such as third-party indemnification, to manage certain exposures, they are subject to terms such as deductibles, coinsurance, limits and policy exclusions, as well as risk of counterparty denial of coverage, default or insolvency.

If our policies and procedures do not adequately protect us from exposure and our exposure is not adequately covered by insurance or other risk-shifting tools, we may incur losses that would adversely affect our financial condition and could cause a reduction in our revenues as investors in WisdomTree ETPs shift their investments to the products of our competitors.

If our policies and procedures do not adequately protect us from exposure and our exposure is not adequately covered by insurance or other risk-shifting tools, we may incur losses that would adversely affect our financial condition and could cause a reduction in our revenues as investors in our products shift their investments to the products of our competitors.

Technology Risks

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Although we and our third-party vendors take protective measures to secure information, our and our vendors’ technology systems may still be vulnerable to unauthorized access, computer viruses or other events that could result in inaccuracies in our information or system disruptions or failures, which could materially interrupt or damage our operations.

In addition, technology is subject to rapid change and we cannot guarantee that our competitors may not implement more advanced technology platforms

for their products, which could affect our business.

In addition, technology is subject to rapid change and we cannot guarantee that our competitors may not implement more advanced technology platforms for their products, which could affect our business.

Any inaccuracies, delays, system failures or breaches, or advancements in technology, and the cost necessary to address them, could subject us to client dissatisfaction and losses or result in material financial loss, regulatory violations, reputational harm or legal liability, which, in turn, could cause a decline in our earnings or stock price.

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Our ability to operate effectively could be impaired if we fail to retain or recruit key personnel.

The success of our business is highly dependent on our ability to attract, retain and motivate highly skilled, and sometimes highly specialized, employees, including in particular, operations, product development, research and sales personnel.

employees generally may voluntarily terminate their employment at any time.

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Accordingly, our results of operations may vary from quarter to quarter.

Our indebtedness may expose us to material risks, which may impede our ability to refinance our debt upon maturity, increase our cost of borrowing or result in our debt being called prior to maturity.

We are party to a credit agreement with Credit Suisse AG and certain other lenders, whereby the lenders extended to us a term loan, or the Term Loan, of which $179.0 million is currently outstanding and a $50.0 million revolving credit facility, or the Revolver and, together with the Term Loan, the Credit Facility.

The borrowings under the Credit Facility are at a floating rate and mature on April 11, 2021.

There are currently no amounts outstanding under the Revolver.

Our indebtedness may make it more difficult for us to withstand or respond to adverse or changing business, regulatory and economic conditions or to take advantage of new business opportunities or make necessary capital expenditures.

In addition, our credit agreement contains various covenants, that may limit our business activities, including restrictions on our ability to incur additional indebtedness, pay dividends and make stock repurchases.

For example, the credit agreement includes a financial covenant requiring us not to exceed the Total Leverage Ratio.

The failure to comply with the Total Leverage Ratio or other restrictions could result in an event of default, giving our lenders the ability to accelerate repayment of our obligations (See Note 13 to our Consolidated Financial Statements).

To the extent we further service our debt from our cash flow, such cash will not be available for our operations or other purposes.

Any substantial decrease in net operating cash flows or any substantial increase in expenses could make it difficult for us to meet our debt service requirements or force us to modify our operations.

Our ability to repay outstanding amounts under our Credit Facility, to refinance our debt or to obtain additional financing through debt or the sale of equity securities will depend on our performance, as well as financial, business and other general economic factors affecting the credit and equity markets generally or our business in particular, many of which are beyond our control.

Any such alternatives may not be available to us on satisfactory terms or at all.

Legal and Regulatory Risks

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WTAM is also a member of the NFA and registered as a commodity pool operator for certain of our ETFs.

One of our other subsidiaries, WisdomTree Commodity Services, LLC, is also a member of the NFA and registered as a commodity pool operator for a commodity ETF that is not registered under the Investment Company Act.

As a commodity pool operator, we are subject to oversight by the NFA and the CFTC pursuant to regulatory authority under the Commodity Exchange Act.

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regarding our U.S.

listed ETFs is subject to the regulatory authority of FINRA.

listed ETFs is subject to the regulatory authority of FINRA, and the SEC recently adopted rule amendments in seeking to modernize sales and marketing materials, which will impact such materials.

We are also subject to foreign laws and regulatory authorities with respect to operational aspects of our products that invest in securities of issuers in foreign countries, in the marketing, offer and/or sales of our products in foreign jurisdictions and in our offering of investment products domiciled outside of the U.S., such as our ETPs issued by the ManJer Issuers, UCITS ETFs and ETPs issued by WMAI.

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Concerns have been raised at various times about ETFs’ possible contribution to market volatility as well as the disclosure requirements applicable to certain types of more complex ETFs.

In addition, the SEC approved a broad set of reforms regarding data reporting and fund liquidity, which are imposing additional expense and require additional administrative services and requirements, among other matters, in seeking to comply with the new rules.

The SEC also proposed a broad set of reforms regarding derivatives usage that would apply to all registered funds, including ETFs, which would impose additional expense and require additional administrative services and requirements, among other matters.

In addition, the SEC approved a broad set of reforms regarding data reporting and fund liquidity, fund valuation and funds’ use of derivatives, which are imposing, or are expected to impose, additional expense and require additional administrative services and requirements, among other matters, in seeking to comply with the new rules.

New laws or regulations, or changes in the enforcement of existing laws or regulations, applicable to us or investors in our products also may adversely affect our business, and our ability to function in this environment will depend on our ability to constantly monitor and react to these changes.

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In addition to regulatory scrutiny and potential fines and sanctions, regulators continue to examine different aspects of the asset management industry.

New regulation, revised regulatory or judicial interpretations, revised viewpoints, outcomes of lawsuits against other fund complexes or growth in our ETP assets and/or profitability related to the annual approval process for investment advisory agreements may result in the reduction of fees under these

agreements, which would mean a reduction in our revenues or otherwise may lead to an increase in costs or expenses.

Our operations outside the U.S.

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operations of our business, which could adversely affect our business, results of operations, financial condition and cash flows.

In addition, an unfavorable outcome in any such litigation could have a material adverse effect on our business, results of operations, financial condition and cash flows.

In addition, an unfavorable outcome in any such litigation, including claims brought by investors in our WisdomTree WTI Crude Oil 3x Daily Leveraged ETP totaling approximately €9.0 million ($11.1 million), could have a material adverse effect on our business, results of operations, financial condition and cash flows.

See Note 17 to our Consolidated Financial Statements for additional information.

We may from time to time be subject to claims of infringement of third-party intellectual property rights, which could harm our business.

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The occurrence of any of the foregoing could result in unexpected expenses, reduce our revenues and adversely affect our business and financial results.

We have been issued a patent and have applied for another patent, but this additional patent may not be issued to us and we may not be able to enforce or protect our patents and other intellectual property rights, which may harm our ability to compete and harm our business.

Although we have a patent and have applied for another patent relating to our index methodology and the operation of our ETFs, this additional patent may not be issued to us.

In addition, even if issued, our ability to

enforce our patents and other intellectual property rights is subject to general litigation risks.

While we have been competing without the benefit of this patent being issued, if it is not issued or we cannot successfully enforce it and our currently issued patent, we may lose the benefit of a future competitive advantage that they would otherwise provide to us.

We have been issued a patent, but may not be able to enforce or protect our patent and other intellectual property rights, which may harm our ability to compete and harm our business.

Although we have a patent relating to our index methodology and the operation of our ETFs, our ability to enforce our patent and other intellectual property rights is subject to general litigation risks.

If we cannot successfully enforce our patent, we may lose the benefit of a future competitive advantage that it would otherwise provide to us.

If we seek to enforce our rights, we could be subject to claims that the intellectual property right is invalid or is otherwise not enforceable.

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This restriction may discourage potential purchasers from acquiring a controlling interest in our Company.

Our revenues could be adversely affected if the WisdomTree Trust determines that the advisory fees we receive from the WisdomTree ETFs should be reduced.

Our advisory agreements with the WisdomTree Trust and the fees we collect from the WisdomTree ETFs are subject to review and approval by the Independent Trustees of the WisdomTree Trust.

Our revenues could be adversely affected if the Independent Trustees of the WisdomTree Trust do not approve the continuation of our advisory agreements or determines that the advisory fees we receive from the WisdomTree ETFs should be reduced.

Our revenues are derived primarily from investment advisory agreements with related parties.

Our advisory agreements with the WisdomTree Trust and the fees we collect from the WisdomTree U.S.

listed ETFs are subject to review and approval by the Independent Trustees of the WisdomTree Trust.

The advisory agreements are subject to initial review and approval.

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In determining whether to approve the agreements, the Independent Trustees consider factors such as the nature and quality of the services provided by us, the fees charged by us and the costs and profits realized by us in connection with such services, as well as any ancillary or “fall-out”

benefits from such services, the extent to which economies of scale are shared with the WisdomTree ETFs, and the level of fees paid by other similar funds.

If the Independent Trustees determine that the advisory fees we charge to any particular fund are too high, we will need to reduce our fees, which could adversely affect our revenues.

benefits from such services, the extent to which economies of scale are shared with the WisdomTree U.S.

listed ETFs, and the level of fees paid by other similar funds.

Our revenues would be adversely affected if the Independent Trustees do not approve the continuation of our advisory agreements or determines that the advisory fees we charge to any particular fund are too high, resulting in a reduction of our fees.

Damage to our reputation could adversely affect our business.

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Managing such matters may be expensive, time-consuming and difficult.

We are currently pursuing an exit from our investment in AdvisorEngine Inc.

and if we are unsuccessful, we could lose our entire investment.

We are currently pursuing an exit from our investment in AdvisorEngine Inc., or AdvisorEngine.

While the process is not yet finalized, we recognized an impairment charge of $30.1 million on our various financial interests during the year ended December 31, 2019 and now carry these financial interests at $28.2 million (See Note 8 to our Consolidated Financial Statements).

If our anticipated exit is unsuccessful, the net carrying value of our investment could become fully impaired, which would have a material impact on our financial condition and results of operations and may cause a decline in the price of our common stock.

Risks Relating to our Common and Preferred Stock

Risks Relating to our Common and Preferred Stock and Convertible Notes

The market price of our common stock has been fluctuating significantly and may continue to do so, and you could lose all or part of your investment.

The market price of our common stock has been fluctuating significantly and may continue to do so, depending upon many factors, some of which may be beyond our control, including:

the ultimate duration of the COVID-19

pandemic and its short-term and long-term impact on our business and the global economy;

decreases in our AUM;

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our strategic moves and those of our competitors, such as acquisitions or consolidations;

changes in the regulatory framework of the ETP industry and the asset management industry in general and regulatory action, including action by the SEC to lessen the regulatory requirements or shortening the process to obtain regulatory relief under the Investment Company Act that is necessary to become an ETP sponsor;

changes in the regulatory framework of the ETP industry and the asset management industry in general and regulatory action, including action by the SEC to lessen the regulatory requirements or shorten the process under the Investment Company Act to become an ETP sponsor;

the level of demand for our stock, including the amount of short interest in our stock;

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The price and trading volume of our common stock could decline if one or more equity analysts issue unfavorable commentary or downgrade our common stock or cease publishing reports about us or our business.

We may not have the ability to raise the funds necessary to settle conversions of the Convertible Notes or to repurchase the Convertible Notes upon a fundamental change.

We have issued $175.0 million in aggregate principal amount of 4.25% convertible senior notes due 2023, or the Convertible Notes.

Holders of the Convertible Notes have the right to require us to repurchase their notes upon the occurrence of a fundamental change at a fundamental change repurchase price equal to 100% of the principal amount of the notes to be repurchased, plus accrued and unpaid interest, if any, as described in an indenture, or the Indenture, dated June 16, 2020, between us and U.S.

Bank National Association, as trustee.

In addition, upon conversion of the notes, we will be required to make cash payments in respect of the notes being converted as described in the Indenture.

However, we may not have enough available cash or be able to obtain financing at the time we are required to make repurchases of notes surrendered therefor or notes being converted.

In addition, our ability to repurchase the notes or to pay cash upon conversions of the notes may be limited by law, by regulatory authority or by agreements governing our future indebtedness.

Further, if the fundamental change also constitutes a change of control under the Certificate of Designations for our Series A Preferred Stock and we are required to make other redemption payments as a result of the change of control, we would be required to satisfy that obligation before making any payments on the notes.

Our failure to repurchase notes at a time when the repurchase is required by the Indenture or to pay any cash payable on future conversions of the notes as required by the Indenture would constitute a default under the Indenture.

The conditional conversion feature of the Convertible Notes, if triggered, may adversely affect our financial condition and liquidity.

In the event the conditional conversion feature of the Convertible Notes is triggered, holders of notes will be entitled to convert the notes at any time during specified periods at their option, as described in the Indenture.

If one or more holders elect to convert their notes, we would be required to settle any converted principal through the payment of cash, which could adversely affect our liquidity.

Preferred Shares issued in connection with the ETFS Acquisition contain redemption rights, which, if triggered, could materially impact our financial position.

In connection with the ETFS Acquisition, we issued 14,750 shares of preferred stock, or Preferred Shares, to ETFS Capital which are convertible into 14,750,000 shares of our common stock, subject to certain restrictions.

In connection with the ETFS Acquisition, we issued 14,750 shares of preferred stock, or Preferred Shares, to ETFS Capital Limited, or ETFS Capital, which are convertible into 14,750,000 shares of our common stock, subject to certain restrictions.

ETFS Capital also has redemption rights for the Preferred Shares to protect against corporate events such as our having an insufficient number of shares of authorized common stock to permit full conversion and if, upon a change of control of us, ETFS Capital does not receive the same amount per Preferred Share that it would have received had the Preferred Shares been converted prior to a change of control.

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day period ending on the date of such attempted conversion or change of control, as applicable, multiplied by 1,000.

The redemption value of the Preferred Shares was $72.7 million at December 31, 2020.

Future issuances of our common stock could lower our stock price and dilute the interests of existing stockholders.

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In addition, the sale of a substantial amount of common stock in the public market, either in the initial issuance or in a subsequent resale by the target company in an acquisition which received such common stock as consideration or by investors who acquired such common stock in a private placement, could have a material adverse effect on the market price of our common stock.

A provision in our certificate of incorporation and by-laws

Provisions in our certificate of incorporation and by-laws

may prevent or delay an acquisition of our company, which could decrease the market value of our common stock.

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the authority of our Board of Directors to issue preferred stock with such terms as our Board of Directors may determine.

In addition, we are subject to the provisions of Section 203 of the Delaware General Corporation Law, which limits business combination transactions with stockholders of 15% or more of our outstanding voting

stock that our Board of Directors has not approved.

These provisions and other similar provisions make it more difficult for stockholders or potential acquirers to acquire us without negotiation.

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These provisions might also discourage a potential acquisition proposal or tender offer, even if the acquisition proposal or tender offer is at a premium over the then current market price for our common stock.

The payment of dividends to our stockholders and our ability to repurchase our common stock is subject to the discretion of our Board of Directors and may be limited by our financial condition, the credit agreement, and any applicable laws.

In November 2014, we commenced a quarterly cash dividend and intend to continue to pay regular dividends to our stockholders.

In April 2019, our Board of Directors extended the term of our share repurchase program for three years through April 27, 2022, under which $52.2 million remained available for repurchases as of December 31, 2020.

Under the credit agreement, we are required to comply with various covenants including a leverage test.

A quarterly cash dividend payment in excess of $0.03 per share, as well as share repurchases other than for shares withheld pursuant to the terms of equity awards granted to employees to satisfy tax withholding obligations, are permitted only to the extent we comply with the leverage test and no event of default (as defined in the credit agreement) has occurred and is continuing at the time the cash dividend payment or share repurchase is made as the case may be.

Our Board of Directors may, in its discretion, decrease, but not increase, the level of dividends in the future.

Further, our Board of Directors continue to have the discretion to discontinue the payment of dividends entirely.

Any determination as to the payment of dividends or stock repurchases, as well as the level of such dividends or repurchases, will depend on, among other things, general economic and business conditions, our level of AUM, our strategic plans, our financial results and condition, limitations associated with the credit facilities or other agreements that could limit the amount of dividends we are permitted to pay or the stock we may repurchase, and any applicable laws.

associated with new credit facilities or other agreements that could limit the amount of dividends we are permitted to pay or the stock we may repurchase, and any applicable laws.

If, as a consequence of these various limitations and restrictions, we are unable to generate sufficient income from our business, we may need to reduce or eliminate the payment of dividends on our common stock or cease repurchasing our common stock.

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We have no unresolved comments from the SEC staff relating to our periodic or current reports filed with the SEC pursuant to the Exchange Act.

Our principal executive office is located at 245 Park Avenue, New York, New York 10167.

We occupy approximately 38,000 square feet of office space under a lease that expires in July 2029.

We believe that the space we lease is sufficient to meet our needs until the expiration of the lease.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors