Nuix hits back at $183m options claim from former CEO Eddie Sheehy

Nuix has claimed its former chief executive Eddie Sheehy should be bound by a NSW Supreme Court settlement in his $183m fight over options in the business.

Former Nuix chief executive Eddie Sheehy claims his options should have converted in a 50:1 share split on the company’s listing. Picture: Jane Dempster

Nuix has claimed its former chief executive Eddie Sheehy should be bound by a NSW Supreme Court settlement in his $183m fight over options in the business.

Mr Sheehy alleges the company failed to honour a deal that would have seen his 453,273 options in the business convert in a 50:1 share split upon Nuix’s listing.

On Monday, Nuix argued in the Federal Court that Mr Sheehy’s claims were wrong as it would have required a separate treatment of his options against others held by company figures.

The company said his attempts to claim that each option converted into an entitlement to 50 shares would go against the way other shareholders of the business were treated upon its ASX listing.

Nuix said Mr Sheehy was bound by an earlier finding of the Supreme Court, which held he was entitled to 453,273 options in the business.

Matthew Dark SC, acting for Nuix, argued Mr Sheehy’s acquiescence to his options entitlement in his settlement with the company was the central issue.

Mr Dark said if Mr Sheehy wished to challenge his options allocation that case would need to be litigated in the Supreme Court.

Mr Sheehy, who left Nuix in 2017, has been pursuing the company over his share entitlements for years. At the heart of the dispute is the paucity of paperwork in Nuix’s early days.

An affidavit from Nuix’s former chairman Tony Castanga alleged Mr Sheehy’s options were intended to expire in 2010.

Nuix had claimed in earlier arguments that Mr Sheehy’s entitlements had been extinguished but had to back down after settling in the Supreme Court with Mr Sheehy. It agreed he held entitlements to 453,273 options.

He had alleged a 2008 deal gave him 540,000 options to purchase unissued shares in Nuix.

Mr Sheehy pointed to the sale of 116,727 of his options entitlement in 2016 to investment bank Macquarie, which scooped up a major slice of the company, as proof his options had persisted.

But Dr Castanga’s affidavit noted the business “would never have agreed to the settlement if Mr Sheehy had argued or mentioned that he considered the 2008 options to be exercisable on the basis that a sale of business had occurred”. “If Eddie’s proposed declaration had in any way referred to 22 million options … I would never have agreed to the proposal,” Dr Castanga said.

But documents presented to the court show Dr Castanga had warned Nuix insiders the fight was not over, noting “no doubt we will hear screeches of anguish from Mr Sheehy in the fullness of time” even after settling.

Ian Jackman SC, acting for Mr Sheehy, said Dr Castanga had himself been a beneficiary of the 50:1 share split by Nuix in 2017.

That deal saw Dr Castanga’s Ferodale vehicle, later renamed Blackhall, land 300,000 options worth $79.65m in shares when Nuix hit the trading boards.

Nuix, which proved a market darling upon listing, soared from its IPO price of $5.31 to almost $11.05 by mid-January before it was marred by a string of profit flops and corporate chaos.

Mr Sheehy has presented an expert report from Lonergan Edwards & Associates, arguing his stake could have been worth between $97m and $183m, taking into account price concessions for selling his stake.