Pinned straw:
Thanks for this post @Scoonie. I don't doubt any of this article or the ruthless way PEXA has been forced onto the property market, at least from my dealings in Qld.
That said, we then enter the realms of morality versus investment decisions. I've been a holder of PEXA in a roundabout way by initially investing in LinkedIn Group before they were purchased and we were left with PEXA after the original deal with Dye & Durham (from Canada) fell over. BTW Dye & Durham follow similar tactics to PEXA in Ontario with routine price gouging, etc now that they have a virtual monopoly.
Anyway, I still hold $PXA IRL and will take the profits and run at some time in the near future.
Thanks for the article!!
Hi @lowway
Last week’s aggressive sell-off of Pexa’s announcement (about the property conveyancing regulator pulling the pin on the long-mooted interoperability requirements for PEXA’s systems) also caught my attention, and equally left me somewhat surprised at the market reaction.
While on face value it appears to be a superficially positive announcement (i.e. regulator dropping requirement for an effective monopoly services provider to open up its systems to competitors) – by dropping this requirement in the too hard basket and the State ministers having effectively passed the parcel to the Commonwealth – probably more likely now that we might see some form of coordinated Commonwealth intervention/additional oversight in conveyancing market in next 6-12 months.
I came across this article in The Australian over the weekend, which helps shed some light on the market reaction – as well as the concerns bubbling away in the market over the past 6 months about high staff turnover and what looks like a very ill-considered approach to regulator relations by suing the NSW regulator last year (and could result in them wielding the big stick to teach Pexa a little humility and to remember its place in the pecking order).
Anyways the UBS downgrade wouldn’t have helped (would love to see that broker report if anyone can lay there hands on it) – and all in all I suspect the market is reacting to a perceived greater threat in time to Pexa’s effective monopoly (even though it will enjoy a short-term win with the delay to added competition).
Great business – but also was priced for ongoing effective monopoly – personally I’m now going to see how this all plays out a bit more before entertaining taking a position.
Disc: Not Held (yet) - Strawman and IRL.
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PEXA faces staff exodus as share price plunges 20 per cent
It shouldn’t be that hard to run a monopoly, should it? So what’s going on at PEXA, where senior staff are leaving in droves and the share price is tanking.
Thursday’s review of sharemarket operator Australian Securities Exchange by ASIC should be a salutary lesson in what happens when you start taking your monopoly position for granted, squeezing ageing assets for cash and forget to reinvest in the core business.
But is it a lesson lost on other players in a similar position?
For those that don’t know, PEXA is the only serious player in Australia’s electronic conveyancing market.
A dubious deal stitched up by the states more than a decade ago, has given it the right to clip the ticket on pretty much every property transaction in the country.
PEXA has successfully defended that monopoly status ever since.
So this week PEXA boss Russell Cohen and his team – most notably regulatory and corporate affairs boss Clare Gill – would have been popping the champagne corks at Monday’s news that its main regulator had abandoned efforts to make PEXA open up its systems to competitors.
State government ministers, advised by the Australian Registrars’ National Electronic Conveyancing Council (ARNECC) – stuck the issue of interoperability into the too hard basket, effectively locking in PEXA’s monopoly for the foreseeable future.
And yet PEXA’s stock price tanked after the decision, down more than 20 per cent for the week.
Perhaps there’s a bit more going on behind the scenes … Including an exodus of senior staff.
This year alone PEXA has lost strategy and delivery general manager Kate Camilleri, general manager of risk Kate MacFarlan, technology boss Katy Rowett, head of group experience and design Sarah Dinsmore and regulatory general manager Damien Manuel.
Add to that the departure of chief people officer Sabina Popov, and senior legal counsel Joanna Downes.
And Margin Call hears that another senior lawyer, Catherine Lynch, is the latest to take another job and leave the electronic conveyancing giant.
And then there’s the bizarre situation of the CFO that wasn’t, after Webjet finance boss Tony Ristevski agreed to jump ship to PEXA, and then decided he’d rather not.
That’s a whole swath of senior departures.
A booming Aussie housing market has helped PEXA grow. Picture: AFP
PEXA doesn’t think it’s anything out of the ordinary, though.
Cohen was brought in a year ago from Singaporean technology company Grab, and some management churn is to be expected after a new boss takes over.
Then there’s the company’s cancellation of generous Covid-era benefits – access to 12 additional days off a year has been cut back, for example, and return-to-office orders – have also helped put some staff off-side, the company says.
“We consider the team member turnover rate to be normal and consistent over that period of time for a business the size of PEXA,” a spokesman told Margin Call.
“Our employee value proposition is focused clearly on career growth, learning and performance and connected to customer impact.”
Sure.
But the raft of departures from PEXA’s regulatory affairs and legal team suggests the culture clash with Cohen’s leadership runs a little deeper than just legacy Covid-era workplace benefits.
Running a state-sanctioned monopoly is a delicate business.
It might be a licence to print money, but every rent seeker still needs to maintain a good relationship with the regulators, or that gets a lot more fraught.
PEXA doesn’t think the exodus is anything extraordinary.
And those relationships took a downturn late last year, when PEXA launched legal action against the NSW Registrar General over its refusal to let the monopoly pass on a $1 per transaction fee to customers levied by the National Electronic Conveyancing Data Standards – which is, in turn owned by the states land title registrars.
Signalling that it didn’t want to pay the fee for any of the rest of the nation’s transactions while NSW was stalling probably didn’t help much either.
PEXA might have held off the threat of having to open up its systems to competitors, but its stock tumbled this week after NSW pricing regulator IPART signalled it was considering taking a far tougher line on regulating PEXA’s fees than it has in the past.
That IPART review has a long way to go, and the conveyancer was playing down the likely impact on Thursday.
But as UBS analysts noted this week, in downgrading their recommendation on PEXA stock, maintaining monopoly status simply opens the door to tougher pricing regulation.
Nick Evans Margin Call Columnist and Resource Writer