Nuix (ASX:NXL) share price slips 7% on looming legal action

Nuix shares have come under pressure again today amid further negative press. Here’s the lowdown.

| More on:
ASX share price slide represented by investor slipping on banana skin

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Nuix Ltd (ASX: NXL) share price was struggling today with a looming legal case from the company’s ex-CEO making news.

Adding to the downside, there are now two class action law firms looking at the investigative analytics and intelligence software provider.

By the market’s close, the Nuix share price was trading 6.83% lower at $3.41.

Nuix’s $200 million dark cloud

Between missing prospectus forecasts and heavy media scrutiny, Nuix has had a challenging start to its listed life – to say the least.

Yesterday, Fairfax publications questioned Nuix’s past financial reporting. Specifically, this related to options reportedly purchased by Blackall, an entity said to be controlled by former Nuix board member Tony Castagna.

Due to a lack of paperwork, questions have arisen surrounding whether the purchase was all above board.

But today is a new day, and with it brings a new controversy reported by The Age. The latest story concerns former Nuix CEO Eddie Sheehy and his options in the company.

The options in question were a part of Sheehy’s remuneration package in 2008. A condition of exercise was for Nuix to sell or list in an initial public offering (IPO) for over $40 million.

The core issue revolves around a 50 for 1 share split in 2017, which Nuix’s lawyers say did not apply to Mr Sheehy’s options. Additionally, Nuix lawyers argue that the December IPO does not meet the sale criteria for which the options were exercisable.

After the Nuix share price surged upon listing, Mr Sheehy’s options were valued at $250 million.

Commenting on the matter, as reported by The Age, Mr Sheehy said, “Currently, and by all accounts, Nuix is going to owe me over $200 million in damages. So, the big question for all shareholders is, where is Nuix going to find the funds to pay me? And, if it can’t find the funds, what happens next?”

Further pressure on Nuix share price

Former employees are not the only ones looking for Nuix blood. Missing prospectus forecasts within the first year of listing, among other revelations, has left some shareholders jaded.

Reportedly, at least two class action specialist firms are evaluating the potential for shareholder lawsuits. Both Quinn Emanual and Phi Finney McDonald are investigating Nuix, focusing on misleading and deceptive conduct or breaches of continuous disclosure obligations.

The barrage of negativity was temporarily masked earlier in the week by an apology from current CEO Rod Vawdrey. It seems the respite was short-lived, with the Nuix share price taking another hit from today’s developments.

Mitchell Lawler 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 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.

More on Technology Shares

Young female investor holding cash ASX retail capital return
How to invest

Why I think these two ASX shares could turn $5,000 into $100,000

Here are two ASX shares that I believe could generate big returns for investors.

Read more »

Person pointing finger on on an increasing graph which represents a rising share price.
Technology Shares

Why is the BrainChip share price gaining 5% on Friday?

Why are BrainChip shares on fire this Friday?

Read more »

A girl runs along with her kite flying high in the sky.
Technology Shares

This small-cap ASX share is soaring 33% on strategic partnership news

LiveHire shares are set to finish Friday on a high note.

Read more »

Businessman in suit and holding a briefcase jumps into the sky celebrating the rising Enero share price
Technology Shares

Why is the Kogan share price jumping 12%?

Kogan's shares are ending the week strongly...

Read more »

a man and a woman sitting in a technology related work environment high five each other while the man wears headphones around his heck and the woman sits in front of a laptop.
Technology Shares

Why ASX 200 tech shares are outperforming the market on Friday

Tech shares on fire today and leading the broader market. Here are the details.

Read more »

a man sits at his desk wearing a business shirt and tie and has a hearty laugh at something on his mobile phone.
Technology Shares

What’s boosting the Damstra share price today?

The company has signed a three-year deal with a copper miner. Here are the details.

Read more »

A woman with strawberry blonde hair has a huge smile on her face and fist pumps the air having seen good news on her phone.
Technology Shares

Block share price jumps 9% following Cathie Wood investment

Block's shares are jumping on Friday. Here's why...

Read more »

A man leaps from a stack of gold coins to the next, each one higher than the last.
Technology Shares

Why is the Xero share price leaping higher today?

Xero shares are shooting the moon today. What's gotten investors so excited?

Read more »