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?

[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?