To say that ASX data analytics company Nuix Ltd (ASX:NXL) has had an underwhelming start to life on the Australian share market is probably an understatement. Since listing at around $8 in December, the embattled tech company's shares have plunged around 70% lower.
The Nuix share price has dropped more than 8% in the past 5 trading days and is down 1.63% today to $2.42 per share.
Let's take a look at the reasons why Nuix shares have already been sold off so heavily so soon after first listing on the ASX.
Company background
First, we ought to find out what it is that Nuix actually does.
Nuix's proprietary data processing software allows its clients to convert massive amounts of "messy" data into actionable information. The Nuix data engine can sift through data as diverse as social media posts, emails and other human-generated content to deliver more meaningful real-world solutions.
Nuix works with clients across the corporate, government and legal sectors (among others) to provide services as diverse as data privacy, digital forensics, fraud and corruption investigations, as well as data analytics. It has already racked up a long list of top-tier international clients, including the American Express Company (NYSE: AXP), Amazon.com, Inc. (NASDAQ: AMZN) and our very own Commonwealth Bank of Australia (ASX: CBA).
So, what went wrong?
This all sounds pretty good so far: a junior software company operating in a niche field with an already growing list of major international clients. So how come the Nuix share price been stuck in a perpetual nosedive?
Well, there are at least a few reasons.
Financials
First – and perhaps most important – are the financials. Nuix underperformed in the first half of FY21, falling short of its prospectus forecasts. Revenues for the half came in at $85.3 million, a decline of 4% versus the prior comparative period and just 44% of the prospectus forecast for FY21.
Since the release of its first half results, Nuix has been forced to make a number of earnings downgrades – the most recent of which was communicated to the market at the end of May. Nuix advised that it now expects full-year revenues in the range of $173 million to $182 million (a long way off its original prospectus forecast of $193.5 million).
Legal concerns
There are also legal concerns surrounding the company. Most of these are related to infighting amongst its current and former executives around the validity of options issued as part of its IPO. It has become so serious that Nuix's Sydney offices were raided last week.
In response, Nuix released a statement acknowledging the raid by the Australian Federal Police, while commenting that "the warrant does not relate to any allegation of wrongdoing by the Company."
People
Finally, there have also been some recent people movements at Nuix. While hiring new leadership staff can bring about plenty of positive change for a company, in the short term it can often create unwanted uncertainty around the company's strategy and direction.
CEO Rod Vawdrey has announced that he will retire from the company once a replacement is found. The company is also on the lookout for a new Chief Financial Officer, after long-term CFO Stephen Doyle resigned earlier this month.
