ASIC drops Nuix pre-IPO investigation, but class actions loom

ASIC drops Nuix pre-IPO investigation, but class actions loom

Private class actions from two law firms on behalf of shareholders still to go ahead.

Johnathan Rubinsztein (Nuix)

Johnathan Rubinsztein (Nuix)

Credit: Nuix

The Australian Securities and Investments Commission (ASIC) has dropped an investigation into local software vendor Nuix over allegations of insider trading. 

The publicly listed technology company was facing an investigation into whether its primary backer, Macquarie Group, had overstated the company's sales forecasts ahead of its listing. 

The investigation related to Nuix’s financial statements for the periods ending 30 June 2018, 30 June 2019 and 30 June 2020. 

ASIC was also concerned with Nuix's initial public offering (IPO) prospectus, dated 18 November 2020, whereby it faced allegations of overstating the company's sales forecasts ahead of its $1.8 billion listing on the Australian Securities Exchange (ASX). 

However, ASIC has now determined that it will not take any further action in relation to those matters. 

The corporate regulator is still conducting an investigation relating to Nuix’s market disclosure in the period since listing, which Nuix said it is cooperating with. 

Shine Lawyers, which launched a class action against Nuix off the back of the ASIC investigation in November, told ARN it plans to pursue its case.

In a statement,  Shine Lawyers class actions practice leader Craig Allsopp said: "ASIC has only dropped one investigation, into the IPO, and is still investigating Nuix’s conduct post listing. Our claim makes allegations both in relation to the IPO and in relation to Nuix’s conduct after listing.

"Because most of the options available to ASIC to pursue action against companies are criminal in nature or involve penalties, the burden of proof for any action that ASIC might take against a company or directors is generally higher than that required for shareholders taking civil action."

Allsop added that ASIC's decision to drop the investigation is "very unlikely to have any impact on the Nuix shareholder class actions". 

"The majority of shareholder class actions commenced in Australia involve conduct that ASIC has either not investigated at all or has investigated but taken no further action," he said.

Phi Finney McDonald, which launched a second class action on behalf of Daniel Joseph Batchelor on 23 November in the Supreme Court of Victoria, told ARN it intends to continue its own investigation.

"I note that while Nuix’s ASX announcement confirms that while ASIC has concluded its investigations in respect of Nuix’s relevant financial statements and the prospectus for its initial public offering, it further confirms that ASIC’s investigation into Nuix’s compliance with its continuous disclosure obligations in the period since listing remains ongoing," said Tim Finney, director of the law firm. 

Phi Finney McDonald’s claim focused on Nuix’s listing on the ASX at an IPO price of $5.31 in December 2020, which included, among other things, its guidance for FY21. 

Follow the second claim, Nuix expedited the departure of its outgoing CEO, Rod Vawdrey, a month early. 

Vawdrey flagged his intent to leave the position in June amid the initial allegations concerning the vendor's $1.8 billion public listing, with Jonathan Rubinsztein stepping into his shoes.

In August, Nuix reported its profits for 2021 sunk by 107 per cent, ending the financial year with a $1.6 million loss.

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