Shares in forensic data company Nuix Ltd (ASX: NXL) have been some of the most traded on the ASX in recent weeks according to Commsec.
Buying volume has been high, which suggests that some have been taking advantage of the recent share price weakness.
After one of the most hyped IPOs of 2020, Nuix’s market valuation has plummeted more than $3 billion on the back of earnings downgrades and a subsequent media investigation into concerns of governance issues and financial reporting quality.
For a more detailed summary of Nuix’s recent history, check out my colleague, Lachlan Buur-Jensen’s article: How Nuix (ASX: NXL) shares can revive.
NXL share price
Recent developments
Last week, it was revealed that both Nuix and Macquarie Group Ltd (ASX: MQG) had been issued notices by the Australian Securities and Investments Commission (ASIC).
Macquarie – which floated Nuix and remained a substantial shareholder, cashed in on over $550 million soon after listing. Further information is now being required to determine if Macquarie could’ve had more control of the situation, which dates back to 2018.
ASIC’s involvement has been the result of the recent joint investigation by The Age, The Sydney Morning Herald and The Australian Financial Review.
However, it was recently revealed that ASIC had previously ignored tip-offs from a law firm on behalf of an anonymous client that raised concerns about Nuix’s ability to reach revenue forecasts.
CFO departs
Even more recently, it was revealed that Nuix CFO Stephen Doyle will depart the company after being in the position for 10 years.
His resignation comes shortly after another article that disclosed details of his share transfers to his brother in Switzerland.
In September 2012, ASIC was notified by Doyle that he had been issued with 50,000 Nuix shares worth $301,500 at the time.
Three years later, Doyle then notified ASIC that the same shares had been sold to his brother in July 2012 – six weeks before he apparently owned them.
Despite not owning the shares, Nuix continued to produce documents that showed Doyle remained a shareholder. When Nuix listed last year, it showed that Doyle was Nuix’s 14th largest shareholder with 2 million shares.
What to do with Nuix shares?
Beneath the surface of all the recent media attention, Nuix may still have a compelling product offering with some nice structural trends to further point the company in the right direction.
With management quality a large component of my own investment philosophy, Nuix just isn’t investable on governance issues alone, despite how attractive its product offering may be.
That being said, if management took steps to turn the company around and instil some confidence back into investors and the public, Nuix might be worth taking a much closer look at.
If you want to learn how to better assess management teams, I’d highly recommend checking out Rask’s Value Investor Program.
