Nuix share price dives 16% on new legal battle with former CEO

This tech company's former CEO is taking it back to court.

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Key points

  • Nuix shares are crashing on Wednesday
  • Investors have been selling the tech company's shares after its former CEO appealed a recent court decision
  • Nuix is being sued for $61 million plus interest

The Nuix Ltd (ASX: NXL) share price has come under significant pressure on Wednesday.

At the time of writing, the investigative analytics and intelligence software provider's shares are down 16% to $1.07.

Why is the Nuix share price crashing?

Investors have been hitting the sell button on Wednesday after the company's former CEO, Edward Sheehy, appealed a recent court decision.

This relates to Sheehy's claims that he validly exercised options in January 2020 that would have entitled him to be issued with approximately 22.6 million shares. And with the former CEO claiming that he would have sold these shares long before Nuix shares had collapsed, he was seeking an award of damages of up to $169 million plus interest.

A month ago, the Nuix share price rocketed higher after the court dismissed his claims.

However, Nuix has now been notified that Sheehy has lodged a notice of appeal in respect of certain aspects of that decision.

The release notes that Sheehy contends that the primary Judge was incorrect in concluding that he was precluded from raising the matters in his claims by reason of the doctrine of Anshun estoppel and that share options held by Mr Sheehy could not be exercised following Nuix's IPO in December 2020.

What's next?

It is worth noting that Sheehy is not appealing the primary Judge's findings that Nuix had not engaged in any oppressive or unconscionable conduct.

In addition, Nuix notes that:

Mr Sheehy has also not appealed the primary judge's finding, that: even if he was to be successful in his claims that he was entitled to 22,663,650 shares in respect of his 453,273 options; and that he was entitled to exercise those options following the Nuix IPO.

As a result, his maximum potential damages claim would be approximately $61 million plus interest rather than the $169 million plus interest he originally claimed.

Nevertheless, Nuix continues to reject Sheehy's claims and will defend the appeal.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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