Blockbuster start for new market darling Nuix

The Macquarie-backed analytics outfit has posted the biggest IPO for the year, joining Afterpay and Xero as a red hot ASX tech stock.

Nuix CEO Rod Vawdrey rings the ASX bell, at the Australian Stock Exchange (ASX) in Sydney. Picture: Bianca De Marchi

The stunning $2.7bn sharemarket debut of Macquarie-backed analytics and intelligence software player Nuix will help spur on a fresh wave of growth for the ­nation’s technology sector, according to chief executive Rod Vawdrey.

The data analytics company, which serves clients including the Australian Defence Force, the US Securities and Exchange Commission and Amazon with its high-powered forensics software, listed at a 60 per cent premium in what was Australia’s biggest IPO of the year.

The listing has added to interest in the tech sector, with established players such as New York-listed Atlassian and local players Afterpay and WiseTech being rushed by investors this year as the coronavirus pandemic turbo­charges the use of technology at home and in the workplace.

The debut also sets the stage for the $1.8bn float of Liberty Financial later this month.

Nuix shares on Friday launched on the ASX at $8.50, a substantial premium to shares sold in the IPO at $5.31. The stock reached as high as $9 before ending the session at $8.14.

Mr Vawdrey told The Weekend Australian that while the listing was exciting, it was “just one step in the journey”.

“One of the things I wanted to do when I came back to Australia from living overseas was show that innovation is at the core of what our engineers can do in Australia. We have engineers that can play on the world stage, in terms of their capability and data science,” Mr Vawdrey said. “The fact that we have such a strong opportunity going forward is being reflected in how the market is reacting.”

Technology shares have been hot property as investors look for the next wave of growth in the face of a subdued economy and ultra-low interest rates.

The ASX All Technology index — which tracks a basket of stocks including Afterpay, REA Group, WiseTech and Seek — is up 35.6 per cent in the calendar year to date, easily outperforming the benchmark S&P/ASX 200, which is down nearly 1 per cent over the same period.

Formed two decades ago, Nuix is now looking to aggressively tackle Europe and the US, having recently appointed former US ­ambassador to Australia Jeffrey Bleich as chairman.

Nuix is taking on a security and investigative software market valued by Morgan Stanley at $US27bn ($36bn) last year, with the company’s “secret sauce”, the Nuix engine, which can search at least 1000 file types with high speed and accuracy.

Analysts say the future is bright for the industry, given a rapid rise in data use combined with increasing corporate governance and surveillance.

The Sydney-based company also has plenty of room to grow, given it has lower customer revenues from the cloud than some of its peers, many of which are currently trading at all-time highs. Mr Vawdrey said the company’s platform had more utility than people tended to think.

“Investors now understand the generalised nature of the Nuix processing platform,” he said.

“People think of the use cases like forensic investigations in law enforcement, but with very little additional R&D we can use it in governance, risk and compliance, and things like the banking royal commission. It can be very quickly adapted to a lot of new use cases.

“Having this additional broad-based investor community behind us will really give us the opportunity to open up new geographic markets, go after new corporate sectors that we haven’t had the ­capacity to do and do some really fun things with new use cases that leverage our core technology.”

Under the IPO, the company raised $953m, with $677.4m going to existing shareholders. With 317.3 million shares on issue, the debut share price gives Nuix a market capitalisation of $2.7bn.

The stock’s rise was a big win for Macquarie Group, the company’s largest shareholder, which funded Nuix through its venture capital arm. Macquarie has a stake of 30.1 per cent, giving it a value of about $900m. BNP Paribas holds 7.4 per cent, while Citi and UBS will hold slightly smaller shares.

Nuix co-founder Anthony Castagna holds 4.2 per cent through Blackall Limited, owned by Derlick Limited, which maintains his retirement fund, and ­Armitage Investments holds 2.8 per cent. Mr Vawdrey holds a 0.5 per cent stake. The stakes held by the key executives are worth $107m and $13m respectively.

As part of the listing, 37.9 per cent of the shares on issue will be subject to escrow restrictions.

Nuix said in its prospectus that in the last financial year the company achieved $175.6m in revenue, up 25.9 per cent on the previous year, and was expecting to make a $20m net profit in the 2021 financial year.

It isn’t all smiles for Nuix. The company is embroiled in a legal fight with its former co-founder and chief executive, Eddie Sheehy, who has claimed in a Federal Court filing that it treated him unfairly in handling his shares.

Management celebrated its milestone on Friday night in a low-key fashion given Mr Vawdrey said all the nearby restaurants had been booked out.

“We thought we should have our board all together, because we’ve got some incoming and some outgoing, and we couldn’t find a restaurant so we’re doing it at my house,” he said.