ASX Limited shares (ASX:ASX) fell 8.62% on Thursday to $64.22, moving red on a YTD basis (-1.32%) after the exchange operator revealed a significant increase in expected operating expenses related to the ongoing Australian Securities and Investments Commission (ASIC) inquiry.
The company now anticipates incurring an additional $25 million to $35 million in operating expenses in FY 2026. These costs are attributed to increased resourcing, the establishment of a dedicated secretariat, legal fees, and other related internal and external expenses related to the ASIC inquiry.
ASX CEO Helen Lofthouse acknowledged the rising costs, stating, “When we last updated the market on 16 June, we acknowledged the ASIC Inquiry had only just been announced. Since then, we’ve completed our assessment of the range of expenses we expect to incur in relation to the Inquiry.”
The ASIC inquiry, launched on June 16, is investigating ASX’s governance, capabilities, and risk management frameworks, triggered by what ASIC Chair Joe Longo termed “repeated and serious failures” at the exchange. The probe focuses on ensuring the stability and security of Australia’s critical market infrastructure.
ASX’s historical premium valuation, reflected in its ten-year average price-to-earnings (PE) ratio of 28.31, has been predicated on its near-monopoly position in the Australian exchange sector. However, the current regulatory headwinds may prompt a re-evaluation of this premium.
Top Australian Brokers
- Pepperstone - Top Australian broker - Read our review
- eToro - Invest in ASX and international shares - Read our review
While the market is currently focused on the negative impacts of the ASIC inquiry, it’s worth considering that this increased scrutiny could ultimately benefit ASX in the long run. The forced investment in improved governance and risk management frameworks may lead to a more robust and resilient exchange, reducing the likelihood of future operational failures.
Furthermore, the current sell-off could be overdone, presenting an attractive entry point for investors who believe in ASX’s long-term value and its essential role in the Australian financial system. The company’s consistent profitability and strong cash flow generation capabilities should not be overlooked, even amidst the current challenges.
However, the regulatory pressure and associated costs continue to weigh on the company’s financial performance and stock valuation. Investors will be closely monitoring the progress of the ASIC inquiry and legal proceedings to assess ASX’s ability to navigate these challenges and restore market confidence.
The company faces a challenging task in restoring investor confidence and addressing the regulatory concerns while maintaining the exchange’s operational efficiency and profitability.
Don’t Buy Just Yet
You will want to see this before you make any decisions.
Before you decide which shares to add to your portfolio you might want to take a look at this special report we recently published.
Our experts picked out The 5 best ASX shares to buy in 2025.
We’re giving away this valuable research for FREE.
Click below to secure your copy
