ASX-listed Property Exchange Australia, widely known as PEXA, is facing significant financial pressure following an interim ruling by the Independent Pricing and Regulatory Tribunal (IPART). The regulator’s findings, released in early July, mandated a 20 per cent reduction in PEXA’s service fees, effectively halving its profits and wiping $400 million from its market value. PEXA, an electronic lodgment network operator, facilitates the smooth electronic exchange of documents required to settle property transactions. It streamlines the conveyancing process for Australian properties, providing vital digital infrastructure for the real estate sector.
The preliminary report culminated in a public hearing on July 21, where PEXA’s management and shareholders presented their case against the findings, arguing they were overly harsh. The company’s origins trace back to former Prime Minister Kevin Rudd’s Council of Australian Governments (COAG) gatherings, built with state government and private capital support. After its 2019 privatisation and subsequent 2021 ASX listing with a $3 billion valuation, PEXA’s monopoly in electronic conveyancing has consistently drawn regulatory scrutiny, with efforts shifting from promoting interoperability to direct price regulation.
At the hearing, fund manager Tom Young of Renaissance Asset Management highlighted what he perceived as a significant discrepancy. He pointed out that state governments privatised their 30 per cent stake for $480 million in 2019 when the regulated asset base (RAB) was assessed at $600 million. Young argued that IPART’s current $368 million RAB valuation, which underpins the proposed price cuts, did not align with the historical privatisation value, suggesting a critical element was missing from the report. Conversely, other industry participants, such as Christopher Lane from Deep Blue Company, supported the ruling, emphasising the importance of cost savings for users. Investors are now grappling with PEXA’s 40 per cent share price drop since March, weighing whether it presents a deep value opportunity or a bear trap, as analysts’ price targets vary widely from $9.20 to $15.50.
