Australian-based Nuix is one of the biggest and well-known eDiscovery software companies in our industry. Unfortunately for them, they’re also getting a lot of press and attention for the handling of their Initial Public Offering (IPO) on the Australian Stock Exchange (ASX) and their stock has been tanking of late. Australian press outlets have been covering stories related to the Nuix IPO daily, even multiple times a day.
The Nuix IPO floated on the ASX last December at $5.31, in a deal led by its major shareholder, investment bank Macquarie Group. Shares have fallen from a peak of almost $12 to close at just $3.40 as of last night (when I checked it for this story).
In particular, the Sydney Morning Herald has been covering Nuix pretty much daily for over a week, sometimes more than once a day. Their coverage began with this article that detailed a joint investigation by The Sydney Morning Herald, The Age and The Australian Financial Review. Their investigation, “based on interviews with current and former staff and investors, who asked to remain anonymous, as well as confidential internal documents, raises questions about Nuix’s governance and financial accounts years before it floated”. The report states that “the internal concerns even led to an attempted coup of Nuix chief executive Rod Vawdrey which was ultimately thwarted by [Macquarie Group executive Dan] Phillips and the board”.
A lot of attention of the stories and investigation have been focused on former chairman Dr. Tony Castagna, who spent time in jail for tax fraud but whose conviction was reportedly quashed and an acquittal was entered. According to the reports, Castegna had a $3000 options package that he cashed out for $80 million when Nuix listed on the sharemarket last December. The story reporting the investigation by The Sydney Morning Herald, The Age and The Australian Financial Review into that transaction is documented here.
According to this report, the chairman of Nuix, former US ambassador to Australia Jeff Bleich, conceded at a briefing last week that the company needs more transparency and governance to reassure investors, telling them that Nuix had operated as a private company for many years with essentially one investor, Macquarie Group, and because of that it did not develop the internal structures needed to ensure strong investor relationships. He said it did not communicate its business priorities and processes as would be expected of a company with a valuation of more than a billion dollars.
“And that’s on us, that’s our bad. Building trust with you, our investors really is our top priority,” Bleich said.
Regardless, as you can imagine, the investigation and reports have reportedly led to at least two class action specialist firms that are investigating a potential shareholder lawsuit. According to this report, “Sydney-based firm Quinn Emanuel and Melbourne’s Phi Finney McDonald are both actively investigating Nuix, with lawyers preparing to build a case around misleading and deceptive conduct or breaches of continuous disclosure obligations.” In the report Quinn Emanuel partner Damian Scattini is quoted as saying “It just seems to me that this was a puffed up IPO. They’re [investors] blinking in the sunlight saying ‘what happened’?”
Not only that, but Nuix is also facing a multimillion-dollar damages claim by its former CEO Eddie Sheehy. According to this report, in his first public statement on Nuix since he left the company in 2017, Mr Sheehy confirmed his damages claim could run to more than $200 million and said, “Where is Nuix going to find the funds to pay me?”
While the stories related to the Nuix IPO are getting plenty of coverage down under, they’re not getting much coverage “up over” here in the States, at least yet. One exception (of course) is Rob Robinson’s excellent ComplexDiscovery blog, which covered the story yesterday here, with links to additional articles and PDFs of Nuix’s Response to Media Articles (May 17) and their Investor Day Presentation (May 18). Plenty more to be said on this topic, I’m sure.
So, what do you think? Are you surprised by the reports regarding the Nuix IPO? Please share any comments you might have or if you’d like to know more about a particular topic.
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