What Happened to the ASX?
Yesterday ASX Ltd [ASX:ASX] CEO Elmer Funke Kupper resigned — effective immediately — as Managing Director and CEO of ASX. With Funke Kupper gone, is ASX Ltd ripe for investors? Or is this the time to exit a stock that’s seen solid recent performance?
The reasons for Funke Kupper’s resignation stem from an Australian Federal Police (AFP) investigation into Tabcorp Holdings Ltd [ASX:TAH]. The AFP is investigating a sum of $200,000 that was paid to Cambodian Prime Minister Hun Sen in 2010. Allegations are that the payment — channelled through the US — was part of a strategy to obtain a gaming licence in Cambodia. The strategy has since failed. But Funke Kupper was CEO of Tabcorp at the time. Hence, with an AFP investigation in full swing, Funke Kupper has decided to step down from the ASX.
ASX has appointed an interim CEO, Chairman Rick Holliday-Smith, while they search far and wide for a new CEO.
Funke Kupper was at the helm for four years. In that time the stock soared by 30.99%. Compared to a 19.83% gain in the All Ordinaries, it’s fair to say Kupper Funke has done his job.
But, with uncertainty around the leadership of the company, is now the time to enter or exit the stock? The timing certainly isn’t great. The ASX isn’t the only clearing house in equities trading anymore. Chi-X — now a few years old — is competing head to head with ASX. Furthermore, the industry is undergoing significant change with blockchain technology possibly changing the game for stock exchanges around the world.
Even as recently as two weeks ago, Funke Kupper said at the Australian Financial Review Business Summit,
‘At the ASX we realise we will lose a little bit to begin with, as blockchain could take $5 billion out of the cost of buying shares, but we’re looking to the future. We’re unleashing innovation, competition and better services across the value chain.’
With a vacancy in the CEO’s chair, and no clear long term replacement in sight, who’s going to keep the company moving forward? Usually, when a CEO exits a multi-billion dollar company, there’s time to plan for succession. Not in this case. It’s been a short and sharp exit — and the ASX still needs to move forward in an increasingly competitive and changing industry.
I see short term pain for ASX Ltd as they try to find a way to get solid leadership back at the helm. It could see the stock price fall short term until we know who’s going to take the company forward. Uncertainty is never a good thing when your market cap is $7.96 billion. And when your CEO leaves because of an AFP investigation into another company then you can expect some tough months ahead.