ASIC Just Sued Nuix

ASIC Just Sued Nuix for Misleading Investors: eDiscovery Trends

The Nuix saga isn’t over yet. The Australian Securities and Investments Commission – ASIC just sued Nuix for allegedly breaching their continuous disclosure obligations, while clearing the insider trading allegations against former company chief financial officer Stephen Doyle and his brother Ross.

According to The Sydney Morning Herald (ASIC sues Nuix for misleading, deceptive conduct, written by Simone Fox Koob), ASIC said today that it has filed papers in Federal Court, alleging that Nuix took more than a month to tell the market that forecasts of statutory revenue and annualised contract value in its prospectus were not being materially met.

The legal action comes after a joint investigation by The Sydney Morning Herald, The Age and The Australian Financial Review in May last year exposed serious culture and governance issues inside Nuix and a blotted history of consistently missing budgets and sales forecasts (which I covered here).

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Nuix was the biggest initial public offering (IPO) in Australia for 2020. It listed in December 2020 at an issue price of $5.31, soared above $11 in January as investors lapped up its 330-page prospectus, then crashed in February after investors were blindsided by the company’s half-year results.

ASIC announced earlier this year that an investigation into whether forecasts in Nuix’s prospectus were reasonable had concluded with no findings of wrongdoing.

But in proceedings filed in the Federal Court late on Wednesday, ASIC alleges that the data analytics company made misleading or deceptive statements in its updates to the ASX in February and March last year, which reaffirmed the forecasts contained in the prospectus.

The company had forecast growth at 18.5 percent in its prospectus, however results at the end of the first half of the 2021 financial year showed Nuix’s underlying business as measured by annualised contract value had essentially shrunk by 4 per cent, according to ASIC.

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ASIC alleges it took the company over a month to disclose this material information to the market, despite having an obligation to do so. About $1.2 billion worth of Nuix shares were traded during the period of the contraventions alleged by ASIC.

ASIC chair Joseph Longo said at the heart of the case was the allegation that Nuix failed to disclose to the market in a timely manner the fact that the forecasts were materially not being met.

“That is a standard of disclosure that we have in Australia, we’ve had it for many years. And that’s what this case is all about,” he said.

The fact that ASIC just sued Nuix adds to their turbulent couple of years. In November last year, Nuix was hit with a class action from Shine Lawyers, followed by a second class action from Phi Finney McDonald in March this year. In August, the Supreme Court ordered that those class actions be combined.

What impact has all these events had on the stock price? Last May, when I reported on the story, Nuix’s shares had fallen to $3.40 from a high of over $11. Today, they closed at $0.58. Ouch.

So, what do you think of the fact that ASIC just sued Nuix? Please share any comments you might have or if you’d like to know more about a particular topic.

Disclaimer: The views represented herein are exclusively the views of the author, and do not necessarily represent the views held by my employer, my partners or my clients. eDiscovery Today is made available solely for educational purposes to provide general information about general eDiscovery principles and not to provide specific legal advice applicable to any particular circumstance. eDiscovery Today should not be used as a substitute for competent legal advice from a lawyer you have retained and who has agreed to represent you.

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