Nuix shares slump on fears ASIC might cut ties

Shares in Nuix have been hit hard amid fears ASIC may drop it as a client, but the firm’s data shows almost 80 per cent of its revenue comes from outside Australia.

Shares in Nuix have tanked on fears ASIC may drop it as a client.

Shares in Nuix have tanked on the back of media speculation the corporate regulator was looking to sever its relationship with the ASX-listed tech company.

As revealed in The Australian’s Margin Call column last year, The Australian Securities and Investments Commission was reviewing severing its links with the investigative software provider Nuix.

ASIC put out a tender for “early case assessment and evidence management software” in February 2022.

Media reports the regulator is reportedly set to make a decision on its Nuix licence in coming days sent its stock south as investors offloaded shares ahead of the company’s results on February 20.

Nuix shares fell 25.7 per cent on Monday to close down 39c at $1.12.

An ASIC spokesman said the regulator would not comment on details of its existing supplier agreements and the tender was still ongoing.

“The tender processes are confidential and we are unable to comment on this tender until it is completed,” he said.

An ASX spokesman said he could not reveal if the market operator had hit Nuix with a please explain notice in the wake of the sharemarket rout.

ASIC has used Nuix for more than 10 years, alongside several other Australian and international regulators.

Nuix CEO Jonathan Rubinsztein.

However, ASIC is currently engaged in litigation with current and former members of Nuix’s board amid allegations they allowed incorrect earnings information to be published to the market in the wake of the tech company’s initial public offering.

“Not all situations where security prices move significantly over a short period will result in ASX issuing a price query letter,” the ASX spokesman said.

He said the market may not issue a notice if it considered the price movement normal or where it could be “readily explained by information already known by the market”.

This comes as Nuix chief executive Jonathan Rubinsztein is preparing to reveal to investors how effective the company’s attempts to turnaround its fortunes have been in the first half of the financial year.

In an update in January, Nuix said it expected to deliver annualised contract value between $168-171m.

Former Nuix chief executive Ed Sheehy. Picture: Jane Dempster

Annualised contract value is the measure Nuix uses to report the cash benefit of multi-year software deals. However, Nuix derives more than 80 per cent of its annualised contract value from customers outside Australia.

Nuix’s American customers include the Securities and Exchange Commission and the United States Department of Justice.

In a note last week Morgan Stanley analysts Andrew McLeod and Chris Boulus said Nuix “still has a lot to do” but several key issues had been wrapped up.

This includes a $183m claim by Nuix’s former chief executive Eddie Sheehy, who had taken the firm to the Federal Court in a bid to force it to honour options he held in the business.

“Progress is being made: first, with better than expected 1H FY23 earnings (Jan 19, 2023) and second, by securing this legal win in the Federal Court,” Morgan Stanley wrote.

“Two other legal matters remain outstanding: 1) ASIC case re continuous disclosure and 2) class actions.”

Nuix was contacted for comment.