Nuix (ASX:NXL) share price up 6% despite fresh claims of bad business

The Nuix Ltd (ASX: NXL) share price is climbing today, despite claims in the press of a gap in the company’s recording of options.

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The latest news in a series of reports against Nuix Ltd (ASX: NXL) broke today, with Fairfax publications claiming they’ve uncovered a gap in the company’s recording of options. Despite the bad press, the Nuix share price is on the rise today.

At the time of writing, the Nuix share price has gained 5.71%, with shares in the company swapping hands for $3.70 apiece.

The first of the reports, the result of a joint investigation by the Australian Financial Review, The Age, and The Sydney Morning Herald, was published on Monday. It claimed the company has a history of poor governance and questionable financial disclosers.

After claims against the software company hit headlines on Monday, its share price closed 9.4% lower than the previous session. Nuix’s majority shareholder Macquarie Group Ltd (ASX: MQG) was also implicated in the reports, with its share price also falling 5% Monday.

The Nuix share price recovered yesterday, gaining 12.7% on the back of its investor day presentation, which addressed the claims directly and even included an apology from CEO Rod Vawdrey.

But today brings with it a new battle between Nuix and the press. Let’s take a look at the news hitting Fairfax headlines this morning.

Options reporting mystery

The three Fairfax publications have once again questioned Nuix’s past financial reporting.

This time, the reports relate to options that were apparently purchased by Blackall (formerly named Ferodale). Blackall was said to be controlled by former Nuix board member Tony Castagna.

The reports state that Nuix claims to have issued 300,000 options at 1 cent each to Blackall in 2005. Apparently, the entry issuing the options noted the options were intended for Castagna. 

The options were supposedly cashed out for $80 million at Nuix’s float last year.

According to the publications, aside from a single piece of paperwork in 2005, there was no note of the options’ existence until 2011. They question whether the options were created in 2011 and backdated to 2005.

As has been previously reported, Macquarie purchased its stake in Nuix in 2011. The publications state Macquarie paid $6.03 per share when it bought into Nuix. That would make the options worth a total of $1.8 million in 2011.

According to the reports, and two corporate law experts quoted within them, Nuix has questions to answer whether it backdated the options or not. 

One expert stated that backdating the options to 2005 would be a criminal offence. Meanwhile, the other said the same about not maintaining proper books and logs of options.

Nuix has not responded to today’s allegations.

Nuix share price snapshot

Nuix shares have delivered disappointing returns for shareholders so far in 2021.

Since it floated in early December, the Nuix share price has fallen by around 53%.

The company has a market capitalisation of around $1.1 billion, with approximately 317 million shares outstanding.

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Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. recommends Nuix Pty Ltd. The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited. The Motley Fool Australia has recommended Nuix Pty Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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