WisdomTree gold payments obligation to ETFS Capital resolved for $137M

WisdomTree (NYSE:WT) on Wednesday announced the full resolution of its contractual gold payments obligation to ETFS Capital for ~$137M, compared to the $200M value WT placed on those obligations in its 2022 accounts.

The deal’s annual impact on WisdomTree’s (WT) results adds ~$18M to operating income, expands operating margin by 530 basis points, yields a net income lift of over $13M and is ~15% accretive to current 2023 consensus EPS estimates.

The deal removes the ~$180M deferred consideration – gold payments liability reflected on WisdomTree’s (WT) balance sheet at March 31.

WisdomTree (WT) in 2018 assumed an obligation to pay ETFS Capital fixed payments of 9.5K ounces of gold per year in connection with its acquisition of ETFS’ European exchange-traded commodity, currency and leveraged-and-inverse business.

This mirrored ETFS’ existing obligations to pay a unit of the World Gold Council two-thirds and Rodber Investments one-third of those contractual gold payments.

The contractual gold payments expense was ~$17.1M during the year ended December 31, 2022, and ~$4.5M during Q1.

Gold Bullion (Jersey), a WGC subsidiary, received ~$4.4M in cash and non-voting preferred shares convertible into ~13.1M shares of WisdomTree (WT) stock. Rodber received ~$45.6M in cash.

“While resolving this matter is positive for stockholders, it does not absolve WisdomTree’s (WT) management from its abject failure to translate record AUM into revenue growth and operating margins, through real improvements in the operation of the business,” said Graham Tuckwell, executive chairman, ETFS. The firm is seeking to add its nominees to WisdomTree’s (WT) board.

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