Following the company’s IPO in December 2020, the Australian Securities and Investment Commission has taken legal action against ASX-listed technology company Nuix and its board for alleged violations of disclosure laws, as well as misleading or deceptive behavior around growth forecasts. .
ASIC alleges that Nuix (ASX:NXL) has made misleading or deceptive statements in reaffirming its Fiscal Year 2021 Prospectus forecasts for statutory income and for annualized contract value (ACV) in announcements to the ASX on February 26, 2021 and March 8, 2021.
Nuix was one of the country’s most popular floats when it traded at $5.31 a share less than two years ago, raising about $953 million. It had a market cap of $1.7 billion at the IPO. But since then, a series of reports from Nine media have raised serious questions about the company’s governance, sales forecasts and the backgrounds of some of the people involved with the company.
Nuix’s share price, which peaked at $11.05 in January 2021, is now languishing at $0.575 cents and has lost 77% of its value in the past 12 months.
ASIC had been investigating allegations of insider trading at the company but said yesterday it had completed that investigation and will not take any further action.
Instead, the regulator is suing Nuix’s board of directors for breaching the duties of their directors by failing to take reasonable steps to prevent Nuix from making misleading statements and violating its ongoing disclosure obligations.
The drivers in the firing line include chairman Jeffrey Bleich, Rodney Vawdrey, Susan Thomas, Daniel Phillips and Sir Iain Lobban.
ASIC claims that at the time of the February and March 2021 announcements, Nuix was aware that its ACV for FY21 would likely be significantly lower than expected.
ASIC Chairman Joseph Longo said, “Nuix was a new publicly traded technology company with a complex business model. This meant that investors had strong reliance on the company to provide accurate and timely information about its earnings.”
ASIC also alleges that Nuix has breached its ongoing disclosure obligations, including by:
- publish the ACV result for the first half of 2021 from January 18, 2021 to February 26, 2021 when it publishes its half-year results;
- make corrective disclosures with respect to the announcements to the ASX on February 26 and March 8, 2021, or announce a downgrade;
- announce a cut in its Prospectus forecasts effective April 13, 2021 after ACV for fiscal year 2021 and regulatory revenues were re-forecasted. A downgrade was not announced until April 21, 2021.
Nuix shares totaling $1.2 billion traded during the period of the violations alleged by ASIC.
Longo said Nuix’s ACV result at the end of the first half showed that, instead of growing rapidly at 18.5% as the company had forecast for the full year, Nuix’s underlying business, as measured by ACV, essentially nearly 4% had shrunk over the first half.
“It took the company more than a month, until February 26, 2021, to disclose this material information to the market. Nuix had a duty to disclose this information immediately,” he said
ASIC is seeking explanations, fines and disqualification orders.
In a statement to the ASX yesterday, Nuix said it has cooperated fully with ASIC in investigating these matters.
Nuix denies the allegations against her and the allegations against the director respondents and intends to defend itself in the proceedings.