‘Selling the market vapour’: Why former Nuix CEO wanted to sell ASAP

The embattled company’s former CEO Eddie Sheehy has alleged he missed out on a financial windfall after it blocked his attempts to exercise his options ahead of its market listing.

Former Nuix CEO Ed Sheehy leaving court as he continues his case to sue Macquarie and the company for hundreds of millions of dollars for shares and damages. Picture: Jane Dempster.

Forecasts made by market darling Nuix were so unrealistic former boss Eddie Sheehy wanted to sell all his potential shares before they fell “off a cliff” but was unable to exercise options, a court has heard.

Mr Sheehy, Nuix’s former chief executive between 2006 and 2017, is brawling with the tech company in the Federal Court over claims management declined to strike his options in the company and hand him 22 million shares.

Nuix, for its part, alleges Mr Sheehy was never entitled to the options, arguing they had been wrongly recorded in company documents for years, and that even if he were entitled to the options the criteria under which they would convert to shares had not been met.

The latest round of the legal battle in the Federal Court comes after Mr Sheehy signed a deal with Nuix in the Supreme Court of NSW, clarifying that he was entitled to 453,273 options in the tech company.

The Federal Court case, set to play out over several days in late June before returning for closing remarks in early August, saw arguments around the options on Tuesday.

The court heard Mr Sheehy had attempted to exercise his options in Nuix in the lead-up to the tech company’s hotly anticipated initial public offering.

Mr Sheehy has alleged Nuix’s failure to honour his options saw him short-changed by as much as $183m. Shares in Nuix, which listed at $5.10, quickly soared to almost $11 by mid-January before being thrashed in a sharemarket rout in the wake of revelations about company management and a failure to hit profit targets.

Mr Sheehy said he was keen to strike his options and sell his shares in Nuix because he had “no belief in Stephen Doyle (Nuix’s former chief financial officer), Rob Vawdrey (the former CEO) or the business run by Tony Castanga (the former chair) that they would deliver the results they said they would in the IPO and I wanted to get out as soon as possible”.

Mr Sheehy said he had “absolutely no belief” in Nuix’s growth targets being presented to the market, and “what they were selling the market was vapour”.

“I thought the share price was going off a cliff and I wanted to sell as soon as possible,” Mr Sheehy said.

However, Mr Sheehy said Niux’s lawyers Gilbert and Tobin told him he would be unable to exercise his options.

Nuix disputes whether Mr Sheehy met the criteria under which those options would vest, alleging they were only intended to be honoured in the event of a sale of Nuix.

Justice John Halley SC heard Mr Sheehy’s options were aimed at giving him an incentive to sell the entire of Nuix rather than part of the business.

Shares in Nuix fell 0.62 per cent to 80c on Tuesday.