Nuix Ltd (ASX: NXL) recently listed on the ASX in the biggest Australian IPO of 2020. Since listing with an offer price of $5.31, Nuix shares have skyrocketed to $8.15 per share – an increase of 53% in the space of a week for those fortunate enough to take part in the IPO. This gives Nuix a current market capitalisation of around $2.6 billion.
Who is Nuix?
Nuix is a technology company that creates software used for indexing, searching, analysing and extracting knowledge from unstructured data. This kind of software is useful for law enforcement and governments to try to find the signal in the noise of unstructured data.
The Nuix software also has uses in industry, with companies making use of the technology to deal with internal digital investigations, cybersecurity, and email migration.
Nuix’s IPO was offered at 9x projected revenue in 2021 of $193.5 million or 24.7x projected earnings of $63.6 million. Based on current prices, this gives the company a forward P/E ratio of around 41x.
Why did Nuix go public?
Prior to listing, Macquarie Group Ltd (ASX: MQG) owned 66.1% of Nuix after taking a majority stake in the company in 2011. The balance of the company was held by Blackall with 9.3%, Cavill Armitage with 5.9% and Nuix’s chief executive with 2.5%.
Macquarie carried the 66.1% stake on its balance sheet with a book value of $350 million. Based on Nuix’s offer price, the IPO netted Macquarie $750 million in gross profit with its stake worth around $1.12 billion. Macquarie’s post-IPO stake reduced to 30%, and given Nuix’s post-IPO run, has increased Macquarie’s unrealised return from the IPO.
The IPO of Nuix is Macquarie’s single best investment in its history, overtaking the IPO of Dyno Nobel in 2006, through which the ASX bank made of a profit of $290 million.
The tech company was taken to IPO because Macquarie wanted to realise its massive gain in Nuix, which helps the bank’s bottom line after COVID-19 related impacts saw a 32% drop in net profit.
Where to from here for Nuix?
It is always difficult to invest in companies just after an IPO as the share price tends to be a little erratic as the market tries to price the value of the company’s future cash flows.
Certainly, if investors had participated in the Nuix IPO they would be feeling really happy right about now, but I would wait a few weeks or months to see where the Nuix share price settles after the IPO before rushing in with a buy.