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Item 1A. Risk Factors

2022-02-25 compared with 2021-02-19 · 118 added, 77 removed, 351 unchanged (36% of the section changed)

Any investment in our common stock involves a high degree of risk.

You should consider carefully the specific risk factors described below in addition to the other information contained in this Report before making a decision to invest in our common stock.

You should carefully consider the specific risk factors described below in addition to the other information contained in this Report before making a decision to invest in our common stock.

If any of these risks actually occur, our business, operating results, financial condition and prospects could be harmed.

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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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This could result in limited growth or a reduction in the overall ETP market and result in our revenues not growing as rapidly as it has in the recent past or even in a reduction of revenues.

Adverse market developments arising from the COVID-19

pandemic could negatively impact our 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 and negative global economic consequences arising from the pandemic, among 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, key service providers of ours may be working remotely.

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.

Concentration Risks

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, 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.

At December 31, 2021, approximately 48% of our AUM was concentrated in ten of our WisdomTree ETPs with approximately 19% in four of our precious metal products, 18% 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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Declining commodity prices, and gold prices in particular, including as a result of changes in demand for commodities and gold as an investment, could materially and adversely affect our business.

At December 31, 2020, approximately 26% of our global AUM were in ETPs backed by gold and approximately 12% were in ETPs backed by other commodities.

At December 31, 2021, approximately 20% of our AUM were in ETPs backed by gold and approximately 12% were in ETPs backed by other commodities.

Precious metals such as gold are often viewed as “safe haven” assets as they tend to attract demand during periods of economic and geopolitical uncertainty.

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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.

Our competition may have greater market share, offer a broader range of products and platforms 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 ETPs as loss leaders.

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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.

In addition, several of the largest custodial platforms and online brokerage firms eliminated trading commissions for ETFs.

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

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Performance and Investment Risks

Many of our WisdomTree ETPs have a limited track record and poor investment performance could cause our revenues to decline.

Many of our ETPs have a limited track record and poor investment performance could cause our revenues to decline.

Many of our ETPs have a limited track record upon which an evaluation of their investment performance can be made.

Certain investors limit their investments to ETPs with track records of ten years or more.

Furthermore, as part of our strategy, we continuously evaluate our product offerings to ensure that all our funds are useful, compelling and differentiated investment offerings, to more competitively align our overall product line in the current ETP landscape and to reallocate our resources to areas of greater client interest.

Furthermore, as part of our strategy, we continuously evaluate our product offerings to ensure that all our funds are useful, compelling and differentiated investment offerings, to align our overall product line more competitively in the current ETP landscape and to reallocate our resources to areas of greater client interest.

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 products 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.

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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Operational Risks

Over the last few years, we have expanded our business internationally.

This expansion subjects us to increased operational, regulatory, financial and other risks.

We face increased operational, regulatory, financial, compliance, reputational and foreign exchange rate risks as a result of our international expansion.

The failure of our compliance and internal control systems to properly mitigate such additional risks, or of our operating infrastructure to support such expansion, could result in operational failures and regulatory fines or sanctions.

Our international business subjects us to increased operational, regulatory, financial and other risks.

We face increased operational, regulatory, financial, compliance, reputational and foreign exchange rate risks as a result of conducting our business internationally.

The failure of our compliance and internal control systems to properly mitigate such additional risks, or of our infrastructure to support our international business, could result in operational failures and regulatory fines or sanctions.

If our international products and operations experience any negative consequences or are perceived negatively in non-U.S.

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Our failure to complete strategic transactions or to integrate and manage acquired or combined businesses successfully could materially and adversely affect our business, results of operations and financial conditions.

We instruct trades and perform other operational processes in respect of crypto basket ETPs that we have launched in Europe.

Operational failures could materially affect our business and harm investors in these products.

We have launched products indexed to baskets of cryptocurrencies in Europe.

We have outsourced the administrator, transfer agent and custodial functions for these products.

While we typically outsource portfolio management services to third-party sub-advisers

for our products, in this case, we instead act as determination agent and place buy and sell orders directly with a broker to rebalance these crypto basket ETPs in line with the indices.

These rebalances will occur either quarterly or annually depending on the product.

Expanding trading volumes may increase the risk of trading errors.

The failure of any of our vendors to provide us and our products with the outsourced services and our failure to correctly place trade orders could lead to operational issues and result in financial loss to us and/or investors in our products.

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 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.

On December 30, 2020, the U.K.

and the EU entered into a Trade and Cooperation Agreement to regulate certain aspects of their relationship following the end of the transition period.

The enactment of the European Union (Future Relationship) Act 2020 brought into effect in the U.K.

certain provisions of the Trade and Cooperation Agreement.

The terms of the Trade and Cooperation Agreement contemplate further agreements and amendments to be negotiated and agreed.

There are legal and regulatory aspects of EU membership, such as certain financial services arrangements, which are not maintained by the Trade and Cooperation Agreement and where “equivalence” decisions have not been made and/or may be withdrawn unilaterally.

While the medium to long-term consequences of the decision to leave the EU and application of the Trade and Cooperation Agreement remain uncertain, there could be short-term volatility, which could have a negative impact on general economic conditions and business and consumer confidence in the U.K., which may in turn have a negative impact elsewhere in the EU and more widely.

Among other things, the U.K.’s departure from the EU and agreement of the Trade and Cooperation Agreement could lead to instability, including volatility, in the foreign exchange markets, including volatility in the value of the pound sterling or the euro.

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.

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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 our products.

Third-Party Provider Risks

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

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

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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 our products.

We currently primarily depend on Mellon Investments Corporation, Newton Investment Management North America, LLC and Voya Investment Management Co., LLC to provide portfolio management services and other third parties to provide many critical services to operate our business and our U.S.

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 our products and a third-party provider of indicative values of the portfolios of our products.

We depend on third-party vendors to provide us with many services that are critical to operating our business, including Mellon Investments Corporation, Newton Investment Management North America, LLC and Voya Investment Management Co., LLC as sub-advisers

providing portfolio management services;

third-party providers of index calculation services for our indexes;

and a distributor 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.

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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.

We currently depend on Swissquote Bank Ltd and Coinbase Custody Trust LLC to provide us with critical custody services for digital currencies that back WisdomTree digital securities.

The failure of Swissquote and/or 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 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.

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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.

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 products issued by 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 (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.

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 products issued by 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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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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We have developed risk management policies and procedures and we continue to refine them as we conduct our business.

Many of our procedures involve oversight of third-party vendors that provide us with critical services such as portfolio management, custody and fund accounting and administration, and index calculation services.

Our policies and procedures to identify, monitor and manage risks may not be fully effective in mitigating our risk exposure.

Many of our procedures involve oversight of third-party vendors that provide us with critical services such as portfolio management, custody, fund accounting and administration, and index calculation.

However, our policies and procedures to identify, monitor and manage risks may not be fully effective in mitigating our risk exposure.

Moreover, we are subject to the risks of errors and misconduct by our employees, including fraud and non-compliance

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We are dependent upon the effectiveness of our own, and our vendors’, information security policies, procedures and capabilities to protect the technology systems used to operate our business and to protect the data that reside on or are transmitted through them.

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.

Although we and our third-party vendors take protective measures to secure information, our and our vendors’ technology systems have experienced cybersecurity threats and 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.

These risks may increase in the future as the Company develops and launches its mobile application.

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.

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employees generally may voluntarily terminate their employment at any time.

The market for these individuals is extremely competitive and is likely to become more so as additional investment management firms enter the ETF industry.

The market for these individuals is extremely competitive and is likely to become more so as additional investment management firms enter the ETF industry and as the digital assets market continues to develop.

Our compensation methods may not enable us to recruit and retain required personnel.

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Our expenses are subject to fluctuations that could materially affect our operating results.

Our results of operations are dependent in part on the level of our expenses, which can vary from quarter to quarter.

Our expenses may fluctuate primarily as a result of discretionary spending, including additional headcount, accruals for incentive compensation, marketing, advertising, sales and other expenses we incur in connection with our day-to-day

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

Our results of operations are dependent in part on the level of our expenses and may fluctuate as a result of discretionary spending, including additional headcount, accruals for incentive compensation, marketing, advertising, sales and other expenses we incur in connection with our operations.

We are also pursuing our digital assets initiative and incurred expenses of approximately $4.0 million during the year ended December 31, 2021.

We are currently projecting additional spending on our digital assets initiative during 2022 ranging from $9.0 million to $14.0 million, however, actual expenses incurred and expenses in future years may ultimately exceed this estimate.

Accordingly, fluctuations in our expenses could materially affect our operating results and may vary from quarter to quarter.

Legal and Regulatory Risks

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subsidiaries, WTAM, is a registered investment adviser and is subject to oversight by the SEC pursuant to its regulatory authority under the Investment Advisers Act.

We also must comply with certain requirements under the Investment Company Act, with respect to the WisdomTree ETFs for which WTAM acts as investment adviser.

We also must comply with certain requirements under the Investment Company Act, with respect to the WisdomTree U.S.

listed ETFs for which WTAM acts as investment adviser.

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

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If we are not ultimately successful in defending ourselves against these claims in litigation, we may be subject to the risks described in the immediately preceding risk factor entitled “We may from time to time be subject to claims of infringement of third-party intellectual property rights, which could harm our business.”

Digital Assets Risks

As we endeavor to expand our digital asset product offerings and services beyond our existing ETP business, we believe the risks associated with our digital assets business include, but are not limited to, the following risks:

Outsourced service provider risks

We rely on third-party service providers in connection with different facets of our digital assets business, including but not limited to custodial arrangements, blockchain and wallet infrastructure, banking relationships, cloud computing, payment processors, data infrastructure, compliance support and product development, including mobile application development, all of which are critical to the success of our digital assets business.

If any third-party service providers fail to adequately or appropriately render services to satisfy their obligations to us, or our customers or consumers on our behalf, such failure could negatively impact the success of our digital assets business.

In addition, such third-party service providers may be subject to financial, legal, regulatory and labor issues, data security and cybersecurity incidents, denial-of-service

attacks, sabotage, privacy breaches or violations, fraud and other misconduct which could directly or indirectly have an impact on our digital asset products and services.

Cybersecurity risks

The use of various technologies is vital to our digital assets business and will become more prevalent which will make us more susceptible to operational and data security risks resulting from a breach in cybersecurity, including cyberattacks.

A breach in cybersecurity, intentional or unintentional, may have an adverse impact on our digital assets business in many ways, including but not limited to, the loss of proprietary information, theft or corruption of data, denial-of-service

attacks on websites or network resources, and the unauthorized release or misuse of confidential information.

Regulatory risks

The digital assets industry is rapidly evolving at an unprecedented rate.

There is a high degree of regulatory uncertainty associated with the digital assets industry, which means that the products and services our digital assets business provides or may provide in the future could subject us to enhanced regulatory scrutiny or otherwise materially impact the quality or nature of such products or services.

The effect of any future legal or regulatory change or interpretation both domestically and internationally is unknown and such change could be substantial and adverse to our digital assets business.

In addition, we are actively engaged or plan to be engaged with a variety of U.S.

federal and state regulators (e.g., the SEC, FINRA, New York Department of Financial Services (NYDFS) and other state regulators) to secure, as necessary, the appropriate regulatory, registration and/or licensing approvals for various business initiatives, including but not limited to:

a New York state-chartered limited purpose trust company;

money services and money transmitter business;

broker-dealer;

investment adviser;

and investment funds.

As we seek to expand globally, similar approvals and/or reliance on exemptions will be required in applicable foreign markets, which may also involve approvals specific to a digital asset or related business.

If we are successful in securing the appropriate regulatory, registration and/or licensing approvals, or otherwise relying on, seeking or confirming exemptions therefrom, for these different initiatives in connection with our digital assets business, we will be subject to a myriad of complex and evolving global policy frameworks and associated regulatory requirements that we would need to comply with, or otherwise be exempt from, in seeking to ensure our digital asset products and services are successfully brought to different markets in a compliant manner.

Failure to secure and/or comply with any such approvals and exemptions could have an adverse effect on our digital assets business.

Blockchain infrastructure risks

The consensus or governance mechanisms of blockchain networks are subject to change, malfunctions and may not receive sufficient support from users and miners, which could negatively impact the blockchain network’s ability to grow and respond to challenges.

In addition, blockchain networks face significant challenges in connection with the volume, speed and security of transactions, the efforts of which to increase or enhance such characteristics of the blockchain network may not be successful.

If the digital asset awards for verifying and confirming transactions on a blockchain network are not sufficiently high to incentivize miners, miners may cease to verify and confirm such transactions or otherwise demand higher fees, which could negatively affect the value of a digital asset.

Anti-Money Laundering (AML) risks

The decentralized infrastructure and anonymous or pseudonymous nature of digital assets could facilitate and create the opportunity for money laundering and terrorist financing activities, thereby circumventing certain anti-money laundering and counter terrorist financing laws and regulations designed to prevent financial crimes both domestically and internationally which could negatively impact our digital assets business.

In addition, certain aspects of our digital assets business will have significantly greater anti-money laundering risk, including risk of fines or sanctions, than our historical ETF business due to the greater number of potential customers, which may also include customers in foreign markets considered to be higher risk and/or customer types considered to be higher risk, for which anti-money laundering and related obligations will apply.

Data privacy risks

In connection with the products or services offered by our digital assets business, we may collect, store, process, or transmit personal data of a customer or consumer to a significantly greater extent than in our historical ETF business.

Any change or failure to comply with data privacy laws or regulations related to the collection, processing, use and storage of personal data could materially affect our digital assets business and overall financial health.

The risk of loss in purchasing, selling, trading, using or holding digital assets can be substantial.

The price and liquidity of digital assets may be subject to high degrees of volatility resulting in large deviations or fluctuations from normalized levels.

There is also heightened custodial risks due to the unique safekeeping attributes associated with public and private keys of digital assets.

Other Company Risks

Actions of activist stockholders against us are disruptive and costly and the possibility that activist stockholders may wage proxy contests or seek representation on our board of directors could cause uncertainty about the strategic direction of our business.

On January 24, 2022, ETFS Capital and Graham Tuckwell (collectively, the “Tuckwell 13D Group”) jointly filed a statement on Schedule 13D to report that the Tuckwell 13D Group beneficially owns 15,250,000 shares of our common stock, representing approximately 10.5% of our issued and outstanding shares of common stock.

Activist stockholders such as the Tuckwell 13D Group may from time to time attempt to effect changes in our strategic direction, and in furtherance thereof, may seek changes in how our company is governed.

Our board of directors and management strive to maintain constructive, ongoing communications with our stockholders, including the Tuckwell 13D Group, and welcome their views and opinions with the goal of enhancing value for all stockholders.

However, an activist campaign that seeks to replace members of our board of directors or changes in our strategic direction could have an adverse effect on us because:

responding to actions by activist stockholders are disruptive to our operations, are costly and time-consuming, and divert the attention of our board of directors and senior management from the pursuit of business strategies, which could adversely affect our results of operations and financial condition;

perceived uncertainties about our future direction as a result of changes to the composition of our board of directors or changes to our stockholder base may lead to the perception of a change in the direction of the business, instability or lack of continuity which may be exploited by our competitors, may result in the loss of potential business opportunities and may make it more difficult to attract and retain qualified personnel and business partners;

these types of actions could cause significant fluctuations in our stock price based on temporary or speculative market perceptions or other factors that do not necessarily reflect the underlying fundamentals and prospects of our business;

if individuals are elected to our board of directors with a specific agenda, it may adversely affect our ability to effectively implement our business strategy and to create additional value for our stockholders.

A change of control of our company would automatically terminate our investment management agreements relating to the WisdomTree U.S.

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

actions of activist stockholders taken against us which could be disruptive and costly and may cause uncertainty about the strategic direction of our business;

decreases in our AUM;

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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.

We have issued $175.0 million in aggregate principal amount of 4.25% convertible senior notes due 2023, and $150.0 million of 3.25% convertible senior notes due 2026, which we collectively refer to as the Convertible Notes.

Holders of the Convertible Notes have the right to require us to repurchase their notes upon the occurrence of certain change of control transactions or liquidation, dissolution or common stock delisting events (each, a “fundamental change”), at a 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 the respective indentures 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.

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

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.

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

Our failure to repurchase notes at a time when the repurchase is required by the applicable 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 Limited, or 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, 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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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 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.

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.

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 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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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