Shares in Nuix Ltd (ASX: NXL) have been on a rollercoaster this week after intensive reporting by a number of media outlets. At the time of writing, the Nuix share price is up 2.9%, with shares in the company swapping hands for $3.51.
The media reports come off the back of a disappointing start to Nuix’s time on the ASX.
The company’s December initial public offering (IPO) was sold as having the potential to be the jewel in the S&P/ASX All Technology Index‘s (ASX: XTX) crown. Such hopes turned sour when Nuix released its results for the first half of the 2021 financial year. They’ve continued to go downhill since.
Over the course of this week, the Nuix share price has dramatically surged or fallen a number of times.
Following a 9.4% drop on Monday, which saw it hit an all-time low, the Nuix share price gained 12.7% the following day. Then, after a 3.3% gain on Wednesday, it fell again yesterday, closing 7% lower.
Let’s take a look at the claims made against Nuix this week.
What’s driving the Nuix share price?
The report was part of a series of articles resulting from a joint investigation by the Australian Financial Review, The Age, and The Sydney Morning Herald. It claimed the company has a history of poor governance and questionable financial disclosers.
Monday’s report discussed Castagna’s 2018 money laundering and tax evasion charges, which he was acquitted of the following year.
It also stated Castagna left Nuix’s board the day its ASX float prospectus was launched. Supposedly, this meant retail investors would have been largely unaware of Castagna’s involvement with the company.
Nuix’s board responded to the claims on Monday, saying:
Nuix has in place robust processes to measure forward indicators of performance in order to ensure that it keeps the market fully informed and has done so on a timely and regular basis. Nuix is committed to the highest standards of corporate governance
The following day, Nuix held its investor day presentation. There, its CEO Rod Vawdrey apologised to shareholders for Nuix’s performance since its float, saying:
That’s on us, that’s our bad. Building trust with you, our investors really is our top priority. I take full responsibility for the performance of the business.
Following Nuix’s investor presentation, the three publications reported more claims against Nuix’s history of disclosing information and its relationship with Castagna.
They claimed there was a gap in the company’s recording of options held by Castagna’s company Blackall (formerly named Ferodale).
According to the publications, Blackall was issued with 300,000 shares in Nuix in exchange for $3,000 in 2005. Though, only one single piece of paperwork noted the options’ existence between 2005 and 2011.
The options were supposedly cashed out for $80 million during Nuix’s IPO.
The publications questioned whether the options were actually issued in 2011 and backdated. They said that in 2011, the options were worth $1.8 million.
The Nuix share price took a big hit on Thursday as the publications reported on looming legal action from the company’s former CEO and two potential class actions.
They said former Nuix CEO Eddie Sheehy is taking legal action against Nuix due to options within his 2008 renumeration package.
The reports stated in order for Sheehy to exercise the options, Nuix had to sell or list in an IPO for more than $40 million.
The main issue is due to a 50 for 1 share split conducted in 2017. Nuix’s lawyers say the split didn’t apply to Sheehy’s options and the December IPO didn’t meet the criteria for which the options were exercisable.
Sheehy claims the share split cost him $118 million.
Sheehy was quoted by the publications as saying:
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?
Two class actions are also being evaluated by law firms. The class actions mainly relate to missing prospectus forecasts during Nuix’s first year on the ASX, which has left some shareholders jaded.
Nuix share price snapshot
Despite its wild ride this week, the Nuix share price is up 7.34% since Monday. However, its share price has dropped 56% since its ASX IPO – leaving many shareholders disappointed.
The company has a market capitalisation of around $1 billion, with approximately 317 million shares outstanding.