Issue #21 | Who's Buying Australia?

ASX - Top 3 Winners & Losers
Deals Down Under - Foreign Capital Buys Australia
Global Markets - The SaaSpocalypse
Other News - Aussie Politics, Sport and Culture

The ASX 200 fell 1.2% for the week, dragged down by materials as iron ore dropped to a three-month low of $US100.85 a tonne, weighed down by rising supply from Guinea's Simandou mine and softer seasonal steel demand. Banks also slipped on concerns about the housing market and falling loan demand. The one bright spot was healthcare, where investors rotated into defensive names after the sector was sold off hard in May. Oil held steady around $US95 a barrel as ceasefire talks between the US and Iran showed no sign of progress. 

This week’s best performers

Pro Medicus, Ltd. (ASX:PME) +25.24%

Pro Medicus gained this week after announcing a 5-year, $16 million contract renewal with The Ohio State University Wexner Medical Center, one of the largest academic medical centres in the US. The renewal came at higher minimum commitments and unit economics than the prior contract, with OSUWMC also adding two new modules, Visage 7 Workflow and Cardiology Imaging, extending Pro Medicus's footprint beyond core radiology. The deal brings total FY26 contract renewals to $141 million, underlining the company's near-perfect client retention record. At $162 a share, PME isn't cheap – but it keeps finding ways to justify the price tag.

This week's worst performers

DroneShield Limited (ASX:DRO) -15.63%

DroneShield had a rough week, caught in the crossfire of improving geopolitical sentiment. When reports emerged of progress in US-Iran ceasefire talks, investors sold out of counter-drone stocks on fears that de-escalation would soften demand for DroneShield's products, with the stock dropping 10.5% on Monday alone on no company-specific news. The week wasn't all bad – DroneShield partially recovered after securing a US$24.9 million contract with the US Department of Defense, with at least US$10 million expected to hit FY26 revenue. Not enough to recover the week, but a reminder the underlying business is winning contracts. 

There's a paradox sitting at the heart of Australian dealmaking. Foreign private equity keeps buying Australian companies, I-MED, Estia Health, Virtus Health, the list goes on, while Australian superannuation funds are sending an ever-growing share of capital offshore. Both things are happening at the same time. Both make complete sense.

According to PwC's M&A Outlook 2026, inbound deals represented 45% of total deal value in 2025, up from 30% the year prior. The reasons aren't complicated: stable rule of law, a growing population, and assets frequently mispriced relative to global peers. When Bain Capital bought Estia Health for $838 million in 2023 and sold it three years later for $2.5 billion, that's a foreign buyer spotting durable value in an ageing population story the local market had underweighted.

The super side is structural. Australia's superannuation system hit $4.5 trillion, around 160% of GDP, and needs to deploy roughly $40 billion every quarter. The ASX can't absorb that. Super funds already own 38% of listed shares, the exchange is shrinking, and IT stocks are just 5% of the ASX 200 versus 20% globally. AustralianSuper's CEO put it plainly: "We are too big for Australia." International allocations crossed 50% for the first time in 2025.

The loop is self-reinforcing: foreign capital buys Australian assets, takes them private, exits at a premium, rarely back to the ASX. Super funds watch those assets disappear from the listed market and send more capital offshore instead. It's not a conspiracy, it's just incentives. But for a country sitting on one of the largest pools of retirement savings in the world, it's worth asking whether Australian capital should be working harder to keep Australian assets in Australian hands.

Last week, Anthropic closed a $65 billion raise at a $965 billion valuation and confidentially filed its S-1 with the SEC ahead of an IPO. The more interesting story is what that capital is being deployed to build, and what it means for the $1 trillion software industry sitting in its path.

The term "SaaSpocalypse" was coined by a Jefferies trader in early February, when roughly $285 billion evaporated from software stocks in 48 hours. The trigger was Anthropic's Claude Cowork launch, which spooked markets into pricing a scenario most CTOs had been quietly debating for months: what happens to per-seat software when one AI agent can do the work of ten users?

The selloff was brutal and indiscriminate. Piper Sandler downgraded Adobe, Freshworks, and Vertex on seat compression fears. Barclays cut Snowflake. Morgan Stanley issued warnings about the software industry's deteriorating debt outlook. Even Microsoft, which posted an $81 billion quarter, saw its stock fall 10% because Azure growth decelerated by a single percentage point. In 2026, beating expectations isn't enough.

The structural problem is real. Per-seat pricing assumed a stable relationship between a human worker and the software they used – ten sales reps meant ten Salesforce seats. AI agents break that assumption. Workday cut 8.5% of its workforce, a company that sells workforce management software. Closer to home, Atlassian cut 1,600 staff in March, with Mike Cannon-Brookes framing it as funding an AI pivot. The irony writes itself.

Not everyone thinks it's terminal. Nvidia's Jensen Huang called the "software is dead" narrative "the most illogical thing in the world," and systems of record, your payroll, your ERP, your compliance stack, aren't going anywhere. The more nuanced reality is that slow-moving, feature-heavy SaaS products priced on headcount are structurally exposed. AI-native competitors that ship weekly are eating their lunch.

For Australian investors, the practical read is straightforward: software ETFs are down roughly 20% year-to-date, valuations are at multi-year lows, and the companies that survive will be the ones that restructure around usage-based pricing and AI-native workflows before the window closes. Whether that's a buying opportunity or a value trap depends entirely on which side of that transition your holdings sit.

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