WisdomTree Investments, Inc. (NASDAQ:WETF) Files An 8-K Other Events

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WisdomTree Investments, Inc. (NASDAQ:WETF) Files An 8-K Other Events
Item 8.01.    Other Events

In May 2000, WisdomTree Investments, Inc. (then known as Individual Investor Group, Inc.) (the “Company”) entered into a Stock Purchase Agreement, to which it received shares of common stock of Tradeworx, Inc. (“Tradeworx”). Tradeworx, based in Red Bank, New Jersey, operates a high-frequency trading business and through its subsidiary, Thesys Technologies, LLC (“Thesys”), licenses high performance trading and analytics technology, including low latency trading, simulation and backtesting, big data analytics and compliance technology. Since 2013, Thesys has provided the Securities and Exchange Commission (“SEC”) with the Market Information Data Analytics System (MIDAS) market surveillance system. In January 2017, Thesys was awarded the contract to provide the technology and serve as Plan Processor for the Consolidated Audit Trail (CAT), a new, comprehensive database of market information that the SEC ordered to be built to allow the SEC and self-regulatory organizations to perform surveillance on order event data linked to customer and account information and to permit regulators to more efficiently and effectively perform market reconstructions.

A few years ago, a dispute arose related to the Company’s ownership stake in Tradeworx. In March 2015, the Company was named a party in a lawsuit in the Delaware Court of Chancery to which a stockholder of Tradeworx sought to have the shares held by the Company invalidated. In August 2016, the court dismissed the claims brought against the Company and Tradeworx (as a nominal defendant), but the number of shares of Tradeworx owned by the Company remained in dispute. On June 20, 2017, the Company, Tradeworx and certain material stockholders of Tradeworx reached an agreement related to the dispute, to which (i) the litigation was dismissed; (ii) the parties released and agreed not to sue each other with respect to the related claims in the lawsuit; (iii) Tradeworx agreed to indemnify the Company against any such claims; (iv) the Company exchanged its current shares in Tradeworx for new shares of Tradeworx stock and a warrant in accordance with the terms of an equity exchange agreement as described below; and (v) the Company and Tradeworx entered into a stockholders agreement providing for certain rights and obligations of the Company and Tradeworx as described below.

to the equity exchange agreement, the Company was issued shares of newly authorized preferred stock reflecting ownership of 19.99% of Tradeworx on a fully diluted basis (excluding certain reserved shares). The shares of preferred stock rank pari passu in priority with Tradeworx’s current preferred stockholders. In addition, Tradeworx issued the Company a warrant to purchase up to an additional 50% of the number of shares of preferred stock issued to the Company at closing, exercisable for five years after the closing, at varying exercise prices that increase over time and set at multiples of a pre-determined Tradeworx valuation (or a new valuation if Tradeworx completes a qualified financing, as defined, within two years). If a claim is brought against Tradeworx or the Company relating to the settlement, the warrant will be exercisable for 50% of the number of shares of preferred stock issued to the Company at closing. to the stockholders agreement, the Company has the right to appoint one of five directors to Tradeworx’s board of directors, as well as additional customary rights, including (i) consent rights on certain transactions (e.g., related-party transactions and certain changes to organizational documents); (ii) pre-emptive rights on future issuances of shares, subject to customary carve-outs; (iii) information rights; and (iv) registration rights.

The Company anticipates recording a pre-tax gain of approximately $4.0 million to $8.0 million representing its preliminary estimate of the fair value of the Tradeworx preferred stock and warrants it received in connection with this settlement.

 

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About WisdomTree Investments, Inc. (NASDAQ:WETF)

WisdomTree Investments, Inc. is an asset management company that focuses on exchange-traded funds (ETFs). The Company’s family of ETFs includes fundamentally weighted funds that track its own indexes, funds that track third party indexes and actively managed funds. The Company operates through exchange traded products (ETP) sponsor and asset manager providing investment advisory services segment. The Company distributes its ETFs through a range of channels within the asset management industry, including brokerage firms, registered investment advisers and institutional investors. The Company offers a family of approximately 86 ETFs. Its portfolio of the United States listed products includes International Hedged Equity ETFs, Equity ETFs, Fixed Income ETFs, Currency ETFs, Alternative Strategy ETFs and Commodity ETFs. Its portfolio of Non-the United States listed products include WisdomTree UCITS ETFs, and Boost Short and Leveraged ETPs.

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