What MSCI's Successful IPO Says About WisdomTree

The wave of ETF excitement driving the MSCI "pop" isn't new; we've seen it before in the ETF space.

I'm talking about WisdomTree (WSDT.PK), of course. WisdomTree's market capitalization topped $900 million before it even had products on the market. Even today, with some of the initial buzz gone, the company is valued at $341 million. Take away $40+ million in cash sitting on its books and you're still left with a $300 million enterprise.

What does that get you? The company currently has about $4.6 billion in assets, and according to Yahoo! Finance, revenues of $13.6 million. In other words, investors are paying 22X revenues for the company.

Does that make sense? I have no idea. The PowerShares buyout valued that company at up to $700 million, although it involved an initial layout of just $40 million. At that level, WisdomTree looks rich.

But it's all about the future, right?

I think the excitement around MSCI (MXB) and WisdomTree are related, and probably a good thing. Both suggest to me that investors believe the asset management business is moving in the right direction: away from mutual funds and toward ETFs; away from hands-on management and toward quantitative strategies; away from active in general and toward passive; and, with any luck, away from high fees and toward low-cost investing.

Written by Matthew Hougan

Comments

[Ric:]

I am no expert by any means but it seems to me there will need to be some consolidation where the smaller players like WSDTwill be aquired. What do you guys think?

2007 Dec 04 11:10 AM

[Ric:]

I am not an expert by any means but it seems there needs to be some consolidation in this business. There are so many smaller players that I don't know how all will survive. What do you guys think?

2007 Dec 04 11:13 AM