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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

2025-02-26 compared with 2024-02-23 · 51 added, 24 removed, 9 unchanged (89% of the section changed)

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The following information, together with information included in other parts of this Management’s Discussion and Analysis of Financial Condition and Results of Operations, describes key aspects of our market risk.

Market risk to us generally represents the risk of changes in the value of our ETPs that results from fluctuations in securities or commodity prices, foreign currency exchange rates against the U.S.

The following information, together with information

included in other parts of this Management’s Discussion and Analysis of Financial Condition and Results of Operations, describes

key aspects of our market risk.

Market risk to us generally represents the risk

of changes in the value of our ETPs that results from fluctuations in securities or commodity prices, foreign currency exchange rates

against the U.S.

dollar, and interest rates.

Nearly all our revenues are derived from advisory agreements for the WisdomTree ETPs.

Under these agreements, the advisory fee we receive is based on the average market value of the assets in the WisdomTree ETP portfolios we manage.

Fluctuations in the value of the ETPs are common and are generated by numerous factors such as market volatility, the global economy, inflation, changes in investor strategies and sentiment, availability of alternative investment vehicles, domestic and foreign government regulations, emerging markets developments and others.

Accordingly, changes in any one or a combination of these factors may reduce the value of investment securities and, in turn, the underlying AUM on which our revenues are earned.

These declines may cause investors to withdraw funds from our ETPs in favor of investments that they perceive as offering greater opportunity or lower risk, thereby compounding the impact on our revenues.

We believe challenging and volatile market conditions will continue to be present in the foreseeable future.

these agreements, the advisory fee we receive is based on the average market value of the assets in the WisdomTree ETP portfolios we manage.

Fluctuations in the value of the ETPs are common

and are generated by numerous factors such as market volatility, the global economy, inflation, changes in investor strategies and sentiment,

availability of alternative investment vehicles, domestic and foreign government regulations, emerging markets developments and others.

Accordingly, changes in any one or a combination of these factors may reduce the value of investment securities and, in turn, the underlying

AUM on which our revenues are earned.

These declines may cause investors to withdraw funds from our ETPs in favor of investments that

they perceive as offering greater opportunity or lower risk, thereby compounding the impact on our revenues.

We believe challenging and

volatile market conditions will continue to be present in the foreseeable future.

Interest Rate Risk

We invest our corporate cash in short -term interest earning assets, primarily in federal agency debt instruments, WisdomTree fixed income ETFs, U.S.

treasuries, corporate bonds, money market instruments at a commercial bank and other financial instruments which totaled $127.4 million and $109.2 million as of December 31, 2022 and 2023, respectively.

During the years ended December 31, 2022 and 2023, we recognized losses on these financial instruments of $16.5 million and $0.5 million, respectively, and any losses recognized in the future may be material to our operating results.

We do not anticipate that changes in interest rates will have a material impact on our financial condition or cash flows.

In addition, our Convertible Notes bear interest at fixed rates of 5.75% and 3.25% for the 2023 Notes and the 2021 Notes, respectively.

Therefore, we have no direct financial statement risk associated with changes in interest rates.

However, the fair value of the Convertible Notes changes primarily when the market price of our common stock fluctuates or interest rates change.

We invest our corporate cash in short-term interest

earning assets, primarily in federal agency debt instruments, WisdomTree fixed income ETFs, U.S.

treasuries, corporate bonds, money market

instruments at a commercial bank and other financial instruments which totaled $109.2 million and $134.0 million as of December 31,

2023 and 2024, respectively.

During the years ended December 31, 2023 and 2024, we recognized losses on these financial instruments of

$0.5 million and $4.9 million, respectively, and any losses recognized in the future may be material to our operating results.

anticipate that changes in interest rates will have a material impact on our financial condition or cash flows.

In addition, our Convertible Notes bear interest

at fixed rates of 3.25% for the 2026 Notes and the 2029 Notes and 5.75% for the 2028 Notes, respectively.

Therefore, we have no direct

financial statement risk associated with changes in interest rates.

However, the fair value of the Convertible Notes changes primarily

when the market price of our common stock fluctuates or interest rates change.

Exchange Rate Risk

We are subject to currency translation exposure on the results of our non -U .S.

We are subject to currency translation exposure

on the results of our non-U.S.

operations, primarily in the U.K.

Foreign currency translation risk is the risk that exchange rate gains or losses arise from translating foreign entities’ statements of earnings and balance sheets from functional currency to our reporting currency (the U.S.

Foreign currency translation risk is the risk that exchange

rate gains or losses arise from translating foreign entities’ statements of earnings and balance sheets from functional currency

to our reporting currency (the U.S.

dollar) for consolidation purposes.

The advisory fees earned on our European listed ETPs are predominantly in U.S.

The advisory fees earned on our European listed ETPs are predominantly

dollars (and also paid in gold ounces, as described below);

however, expenses for corporate overhead are generally incurred in British pounds.

Currently, we do not enter into derivative financial instruments aimed at offsetting certain exposures in the statement of operations or the balance sheet but may seek to do so in the future.

Exchange rate risk associated with the euro is not considered to be significant.

however, expenses for corporate overhead are generally incurred in

British pounds.

Currently, we do not enter into derivative financial instruments aimed at offsetting certain exposures in the statement

of operations or the balance sheet but may seek to do so in the future.

Exchange rate risk associated with the euro

is not considered to be significant.

Commodity and Cryptocurrency Price Risk

Fluctuations in the prices of commodities and cryptocurrencies that are linked to certain of our ETPs could have a material adverse effect on our AUM and revenues.

In addition, a portion of the advisory fee revenues we receive on our ETPs backed by gold, other precious metals and cryptocurrencies are paid in the underlying metal or cryptocurrency.

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

We currently do not enter into arrangements to hedge against fluctuations in the price of these commodities and cryptocurrencies and any hedging we may undertake in the future may not be cost -effective or sufficient to hedge against this exposure.

Fluctuations in the prices of commodities and

cryptocurrencies that are linked to certain of our ETPs could have a material adverse effect on our AUM and revenues.

In addition, a portion

of the advisory fee revenues we receive on our ETPs backed by gold, other precious metals and cryptocurrencies are paid in the underlying

metal or cryptocurrency.

While we readily sell the gold, precious metals and cryptocurrencies that we earn under these advisory contracts,

we still may maintain a position.

We currently do not enter into arrangements to hedge against fluctuations in the price of these commodities

and cryptocurrencies and any hedging we may undertake in the future may not be cost-effective or sufficient to hedge against this exposure.

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 7A. Quantitative and Qualitative Disclosures About Market Risk