A number of years ago I did a story on Jonathan Steinberg, son of Saul – the 1980s era corporate raider. Jonathan was (and still is) the founder/CEO of WisdomTree — at the time, a fast growing investment shop in the business of manufacturing exchange traded funds. ETFs are cheap investment funds that trade like stocks and track every variety of index/basket of equities and bonds that you can imagine. The major indices, emerging markets, junk bonds, and out-there themes like obesity and booze.
Arguably, the ETF revolution has been the most important trend in finance over the past decade. Assets stand at $10 trillion and the idea of easy, cheap passive investing – as opposed to the clunky, high fee mutual fund model – is now the standard. Whether you are a sophisticated institutional investor or a 16 year old goofing around on Robinhood.
I was interested in ETFs as an asset class, but I was more interested in Steinberg. He was coming off a business failure, but WisdomTree looked like a winner and I thought there had to be an interesting father-son dynamic to tap into. After all, the senior Steinberg, who used a tiny leasing company to facilitate a hostile takeover of the insurance giant Reliance, came to define the Barbarians at the Gate mood of the 1980s.
Audacious takeovers, second and third wives, over the top birthday bashes, jaw dropping real estate – and, in the case, Saul, financial disaster.
His collapse was widely covered. When he died in 2012, his obituary presented him as an overreaching, if not iconic, 1980s era corporate raider.
If Jonathan was driven by a desire to cleanse the Steinberg name, then the ascendance of WisdomTree, seemingly, would be the way to do it. The stock was soaring, investor assets were swelling. In short, he seemed to have timed the ETF boom perfectly. Moreover, because of its size, WisdomTree was able to bring new, distinctive funds to the market quickly, beating the likes of Blackrock, Vanguard and State Street to the punch.
Unlike his father, Jonathan, or Jono as he prefers to go by, dodged the spotlight – no charity balls or Met extravaganzas for him. The only time you would see him out and about was with his wife, TV anchor Maria Bartiromo. But even then it was clear that these forays were dutiful. No smile, rigid demeanor, he was coiled, ready to snap at any given moment.
And so it was when I interviewed him.
Mr. Steinberg, who is 50, treats an interview as if it were an earnings call with analysts. Carefully controlled, his answers are laden with data points and financial jargon and he reveals little or nothing about his personal life. Now, when the analysts and industry experts come to him with their doubts (about the future of ETFs), this is what he says:
Wake up!
Mr. Steinberg bellowed the words, startling a reporter and two public relations staff members in a conference room at WisdomTree’s offices. For such a disciplined man, it was a surprising moment of catharsis. A statement, perhaps, that after all these years, this Steinberg has nothing left to prove.
It was 2015, ETFs were becoming a hot thing and I was sold on Steinberg’s vision – that a nimble, forward thinking outfit like WisdomTree could steal market share from the big boys like BlackRock and State Street. Indeed, inside BlackRock, top executives had a similar view and, I was told, were scooping up WisdomTree stock for their personal accounts.
Check this company out, I told my sources – its going places.
They ignored me and good thing they did. The stock peaked at $25 in the spring of 2015, when the story came out, and now trades at $5. WisdomTree’s bespoke offerings lost favor as inventors piled into BlackRock and Vanguard’s larger momentum plays. Jono, feeling desperate, spent a lot of money on acquisitions that went nowhere.
Now, the vultures are circling. Two activist investors, having accumulated a significant stake, are pushing for Steinberg’s ouster.
Per their recent letter to shareholders:
Steinberg, a director and the CEO who has presided over multiple years of value destruction and subpar returns, bears a large part of the responsibility for the company’s underperformance and staggering loss in market share.We believe his strategy of repeatedly attempting to chase the ‘next big thing’ (more often than not ending up in write-offs or divestitures), has caused the company to miss opportunities to capitalize on the cash generation and growth potential of WisdomTree’s core ETF franchise. We, and many other stockholders, strongly believe that WisdomTree critically needs a new CEO who is commercial and has clear and proven ETF expertise with intellectual humility.
The son of the (hostile) take-over artist on the verge of being taken over himself – in quite an unfriendly manner to boot.
Jono is 57 years old, about the same age his father was in 1995 when, after suffering a severe stroke, he gave up the reins at Reliance. In 2001, Reliance filed for bankruptcy and Steinberg, in a sudden financial pinch, was forced to sell off his prized Renaissance paintings and his duplex at prestigious 740 Park (the buyer was Blackstone’s Steve Schwarzman, whose career accent was just then beginning).
Jono is not going bankrupt. Unlike his father, he did not live the grand life and even if he is forced out, he will get his golden parachute.
When the story was published, Jono was furious. This was supposed to be a story about WisdomTree, not my father!!
He cooled off pretty quickly. After all, in terms of the company’s future, the piece was quite complimentary – too much so, in retrospect.
As for his complaint, he should have known: it was always going to be about Saul.