After making a brief recovery earlier in the week, shares in software company Nuix Ltd (ASX: NXL) have fallen another 10% today to $3.31.
NXL share price
What’s been going on with Nuix recently?
On Monday, Nuix found itself as the target of a media investigation
that brought to light governance and accounting issues, which sent its shares down on the day to a record low of $3.06.
The following day, Nuix conducted an online investor presentation, presumably intended to reassure shareholders of the concerns raised as part of the investigation.
Management’s apologies for a lack of internal controls accompanied by the reiteration of a positive long-term vision for the company seemed to achieve the desired effect – shares were up 10% and morale was running higher.
My take
The recent investor day presentation seems to have given the Nuix share price a much needed shot in the arm to instil some confidence in its shareholders.
However, sentiment alone won’t be enough to drive long-term shareholder returns.
Keeping in mind that Nuix has now missed earnings guidance twice already since listing last year, the numbers coming out of its full-year report in August will be crucial moving forward.
I don’t mind that management teams make mistakes occasionally, but it’s also worth observing how they rectify such issues and improve their track record over time.
That being said, some of the issues that were apparently within the company prior to listing weren’t mentioned in Tuesday’s presentation, including its high levels of staff turnover and staff surveys outlining morale problems.
A quick browse on Glassdoor reviews of Nuix seems to confirm that there have been some culture and management issues within the company in recent times. I take this information seriously, but also with a grain of salt, as there are usually disgruntled employees at many companies that are highly regarded.
Summary
I don’t mind giving management another chance to steer the company in the right direction, but for me to be a shareholder, I’d need to see some signs of improvement first.
As a long-term investor, I have no hesitation to wait on the sidelines for the time being so I can gauge the long-term prospects of the company a little bit better.
For some more reading, click here to read: These 3 beaten up ASX growth shares are looking good: XRO, RBL and KGN.
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