The Australian Securities and Investment Commission (ASIC) has commenced Federal Court proceedings against Australian software company Nuix for alleged disclosure breaches and misleading or deceptive conduct.
ASIC has also brought proceedings against members of the Nuix board, including its chair Jeffrey Bleich, Rodney Vawdrey, Susan Thomas, Daniel Phillips and Sir Iain Lobban, who are facing allegations for breaches of their directors duties.
ASIC alleges that directors failed to take reasonable steps to prevent Nuix from making misleading statements and breaching its continuous disclosure obligations.
The corporate regulator is seeking declarations, pecuniary penalties and disqualification orders from the Federal Court.
ASIC alleges that Nuix made misleading or deceptive statements when reaffirming its prospectus financial year 2021 forecasts for statutory revenue and annualised contract value (ACV) in announcements to the Australian Securities Exchange (ASX) on 26 February 2021 and 8 March 2021.
The regulator alleges that at the time of these announcements, Nuix was aware that ACV for FY21 was likely to be materially below forecast, which made those announcements misleading and gave rise to the need for corrective disclosure.
“Nuix was a newly listed technology company with a complex business model," ASIC chair Joseph Longo said. "This meant investors relied heavily on the company making accurate and timely disclosures regarding its earnings.
“Nuix’s ACV result at the end of the first half showed that, far from growing rapidly at 18.5 per cent as the company had forecast for the full year, Nuix’s underlying business as measured by ACV had essentially shrunk by almost 4 per cent over the first half.
“It took the company over a month, until 26 February 2021, to disclose this material information to the market. Nuix had an obligation to promptly disclose this information.”
Nuix shares totalling $1.2 billion were traded during the period of the contraventions alleged by ASIC.
ASIC also alleges that Nuix breached its continuous disclosure obligations when it failed to disclose its first half financial year 2021 ACV result from 18 January 2021 until 26 February 2021; make corrective disclosure regarding the announcements made to the ASX on 26 February and 8 March 2021, or announce a downgrade; and announce a downgrade to its prospectus forecasts from 13 April 2021 after financial year 2021 ACV and statutory revenue had been reforecast. A downgrade was not announced until 21 April 2021.
In February, ASIC dropped an investigation into 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.
During its initial public offering (IPO) Nuix was billed as the biggest IPO of 2020 and, at the offer price of $5.31 per share, Nuix had a market capitalisation of $1.7 billion.
While ACV is not a statutory reporting metric, Nuix’s forecasted ACV growth was promoted in its prospectus. Therefore, ASIC considered it was a significant metric which influences an investor’s assessment of its underlying growth, earning potential and suitability as an investment.