Why the Nuix (ASX:NXL) share price fell 30% in May

The embattled software company had another poor month on the ASX

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The Nuix Ltd (ASX:NXL) share price has finished a dramatic month 30.23% lower than where it started.

Over the course of the month, the software company faced a series of investigative reports and its second revenue downgrade for 2021.

After starting the month at $4.15, the Nuix share price closed yesterday trading for $2.78.

May was the second month in a row that saw a poor performance from Nuix shares. The Nuix share price was driven 19.8% lower over April after the company downgraded its 2021 financial year guidance only weeks after reaffirming it.

Let’s take a closer look at the troubles the Nuix share price has faced in May.

Manic May for the Nuix share price

Last month, before its major troubles had even begun, the Nuix share price had fallen 16%. The drop appeared to be a delayed reaction to its April downgrade.

Nuix’s real trouble started on 17 May.


That morning, Nine Entertainment Co Holdings Ltd‘s (ASX: NEC) Australian Financial ReviewThe Age, and The Sydney Morning Herald began publishing a series on a joint investigation into Nuix.

The series involved 5 articles that ran daily over the course of a week.

Within the articles, the media outlets claimed Nuix had been poorly governed and had a history of bad financial disclosures.

Most of the claims were related to Nuix’s co-founder and former chair Tony Castagna, and his 2018 money laundering and tax evasion charges. Castagna was acquitted of the charges in 2019.  

The publications claimed Castagna left Nuix’s board the day its prospectus was released, meaning many Nuix investors wouldn’t have known Castagna was involved with the company.

They also made allegations about an options package, given to Castagna in 2005.

According to the publications, Castagna was issued 300,000 shares in Nuix for $3,000 in 2005, but only one piece of paperwork noted the options’ existence until 2011.

The options were supposedly cashed out for $80 million during Nuix’s ASX debut.

The publications questioned if the options were given to Castagna in 2011 and backdated to 2005.

The AFP has begun an investigation into the options package. But, they haven’t stated exactly what about the package is suspicous.

Nuix cut its ties with Castagna on Friday, sending its share price falling once more.

Class action lawsuit

A second option package has kept Nuix on its toes recently.

The three Nine publications claimed Niux’s former CEO, Eddie Sheehy, is taking legal action against Nuix over his 2008 remuneration package.

Apparently, Sheehy was told options within his remuneration package weren’t applicable for a 50 for 1 share split, which Nuix conducted in 2017. Sheehy claims the share split cost him $118 million.

Another 2 class actions are also being evaluated by law firms. They mainly relate to prospectus forecasts that were missing during Nuix’s first year on the ASX.

Another downgrade

Yesterday saw May’s final blow to the Nuix share price.

The company delivered yet another downgrade. This time it stated its pro forma revenue will be between $173 million and $182 million for the 2021 financial year.

Nuix’s previous guidance (its April downgrade) stated its pro forma revenue would be between $180 million and $185 million over the 2021 financial year.

Nuix share price snapshot

The poor month’s performance has added to the Nuix share price’s recent woes.

Currently, the Nuix share price has fallen 65% since its initial public offering (IPO) on the ASX in December.

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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 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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