Electro Optic jumps as ASIC investigation fizzles out into measly $4M fine

Electro Optic Systems (ASX:EOS) has seen its share price jump +5% in mid-arvo trades, even as the company reveals it needs to cough up A$4M to ASIC as a penalty the concluding factor in a long-running ASIC investigation relating to revenue guidance claims in 2022.

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“The Company navigated a challenging environment in 2022 marked by strategic, financial, and operational pressures,” EOS wrote on Wednesday.

“Significant business and leadership changes were made towards the end of that year, including the appointment of Garry Hounsell as Chair, Dr Andreas Schwer as CEO and Clive Cuthell as CFO, along with the addition of Robert Nicholson in 2023 as a non- executive director.”

Of course, a settlement is a settlement – and the company’s Chair spoke on Wednesday of the favourable outcome that now EOS has avoided “the potential of a protracted litigation” – which sounds a lot like ASIC and EOS have agreed to disagree.

Or, ASIC has said just give us $4M and we’ll forget about it, but that depends on how cynical you are about the Australian government, and I’m meant to be neutral on paper. Then again, regular readers know that ship sailed long ago.

At any rate, the price action evidences to me at least shareholders may have been expecting worse for the company which has been flagging in its annual reports an ongoing ASIC investigation for at least the last two years, one of the bigger risk factors on its books.

Given the successes Electro Optic has had this year in the contract domain, as well as supplying a world-first CUAS laser weapon system to an undisclosed NATO country (this finance journalist can’t help but think it was probably Poland), that $4M hiccup is far less than the total sum of revenues EOS has boasted this year, making the issue something of a non-starter.

EOS last traded at $4.68/sh.

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