Be Careful of Monopoly Stocks With No Pricing Power

Indian Energy Exchange (IEX) demonstrates this clearly.

IEX enjoyed a market share above 85% in short-term electricity trading. Investors assumed its network effects would protect its profit margins.

However, the Central Electricity Regulatory Commission (CERC) introduced market coupling to aggregate bids across exchanges and set a uniform price centrally.

IEX kept its volume, but its control over price discovery vanished. The stock dropped 28% in a single day in July 2025 as the market realized that market share without regulatory independence does not equal pricing power.

Indian Railway Catering and Tourism Corporation (IRCTC) offers a similar lesson.

It holds a 100% monopoly in online train ticketing in India. In October 2021, the Ministry of Railways directed it to share 50% of its convenience fee revenue.

The stock of IRCTC fell nearly 29% in a single session before the government reversed the order due to market backlash. While the decision was withdrawn, the event highlighted a critical reality.

IRCTC operates at the discretion of the government. It cannot raise convenience fees freely, leaving its pricing power capped despite its complete market monopoly.

This is similar to state-owned telecom monopolies in the late 1990s. Companies held complete control over copper landlines, but pricing was set by national policy rather than market demand.

When technology advanced, those monopolies collapsed because they lacked the pricing flexibility to adapt.

Global markets reveal the same pattern across sectors where dominance failed to protect investors.

Consider Intel in the semiconductor industry. For decades, Intel held over 80% market share in central processing units for personal computers and servers. Investors treated it as an unassailable tech monopoly.

However, Intel lacked pricing power over the broader shift toward mobile architectures and cloud infrastructure.

When Taiwan Semiconductor Manufacturing Company (TSMC) perfected pure-play chip foundry and ARM introduced more efficient chip designs, Intel could not leverage its legacy market share to force higher prices on customers.

Its profit margins compressed, capital expenditures ballooned, and the stock destroyed vast investor capital over a multi-year period despite maintaining substantial legacy market share.

A similar story played out with Western Union in global remittances.

Western Union had a dominant global position with thousands of retail locations worldwide. It had a huge share of cross-border money transfers. Yet, its high transfer fees were treated as a tax by users rather than an indispensable value proposition.

The emergence of digital payment rails, peer-to-peer fintech platforms, and lower-cost wire networks stripped Western Union of its ability to charge premium fees.

The market share remained substantial, but transaction fees crashed and earnings growth stalled. The stock underperformed for over a decade.

In the retail sector, traditional postal operators like Royal Mail in the UK illustrate the regulatory trap. Royal Mail maintained an absolute monopoly on universal letter delivery across the nation.

However, letter prices were heavily regulated by government watchdogs to protect citizens, while delivery costs rose continuously.

When email and digital communications decimated letter volumes, Royal Mail could not hike postage prices enough to offset shrinking margins.

Its statutory obligation to deliver mail nationwide turned its operational monopoly into a high-overhead burden that starved shareholders of returns.

The automotive and infrastructure space offers another parallel in legacy national railway operators across Europe.

National rail companies often enjoy complete operational monopolies on regional rail routes. Yet ticket pricing is regulated as a public good by governments. When energy and wage costs rise, these firms cannot pass cost inflation onto commuters.

Despite running 100% of the network volume, their return on invested capital (RoIC) remains low, making them value traps for equity investors expecting high compounding returns.

Another example is the credit rating agencies during periods of financial reform.

While rating agencies hold an oligopoly mandated by institutional investing rules, regulatory oversight, and threats of legal liability can limit their ability to raise fees.

When regulators alter fee guidelines or put a cap of charges, their revenue growth takes a hit.

Investors must distinguish between operational dominance and pricing autonomy. High market share creates volume, but pricing power creates real economic value.

A company that relies on regulatory protection or public utility status can lose its earnings power quickly, even while retaining its market leadership.

When deciding whether to hold or sell a monopoly stock, investors must run a fundamental stress test.

Ask if the company can double its price over five years without losing 20% of its customer base or triggering state intervention.

If raising prices requires government approval, or if high pricing invites immediate regulatory disruption, the company is a price taker in disguise.

Holding such businesses under the assumption of monopoly compounding leads to severe valuation de-rating over time.

Selling or reducing exposure in favour of companies with genuine commercial pricing power is the prudent path for long-term investors.

Do you invest in monopoly stocks? What do you think about them?

Share your thoughts here.

Warm regards,


Tanushree Banerjee
Editor, StockSelect
Quantum Information Services Private Limited (Research Analyst)