Class action lodged against Nuix alleging “misleading representations” in AUS $1.7bn IPO

A class action has been lodged against beleaguered eDiscovery provider Nuix alleging that it made misleading representations or omissions in its initial public offering prospectus and in market disclosures, and that it failed to comply with its continuous disclosure obligations as an ASX listed company.

The action, lodged by Australian ‘no win, no fee’ compensation law firm Shine Lawyers, is on behalf of William Lay and any other shareholders who acquired shares between 18 November and 30 May 2021 inclusive. While other law firms are involved in investigations into Nuix, this is the first confirmed class action. You can find that class action summary statement here: https://assets.ctfassets.net/tz5iytek6ov8/40fjmoreWzce4IeV678duY/f8b0c0d6dd9665bfc08e7bb45dd184a2/Nuix_Class_Action_Summary_Statement_Sealed.pdf

Shine first announced that it was considering a class action in June. In a news release on 22 November confirming the class action, the Brisbane-headquartered firm said that shareholders were bringing the action against Nuix alleging that it gave “inadequate guidance on revenue, misleading sales forecasts, and [that it] breached the company’s continuous disclosure obligations.”

Class actions practice leader, Craig Allsopp said in a statement that the firm’s investigation has revealed that the “company’s prospectus and financial forecasts may have misrepresented or omitted financial information and potential risks, which was misleading and deceptive to investors.”

He added: “This inflated forecast has ultimately cost shareholders hundreds of millions of dollars. Our class action aims to recover these losses for the thousands of investors impacted by Nuix Limited’s alleged misconduct.”

Nuix said yesterday (22 November), in a formal statement acknowledging the class action, that it disputes the allegations and will be defending the claim.

Nuix has been subject to a number of investigations since its AUS $1.7bn IPO, which subsequently saw share value value crash.  An investigation in May this year by The Sydney Morning Herald, The Age and The Australian Financial Review raised questions over Nuix’ governance and alleged gaps in the company’s records around the stock options of former chairman Dr Tony Castagna, who received AUS $80m when Nuix listed. Since the IPO, chief financial officer Stephen Doyle’s position was terminated, CEO Rod Vawdrey has retired, and Nuix has cut ties with Dr Castagna. The Australian Federal Police in May confirmed that it had begun a probe into the technology company.

Nuix has always maintained that the financial forecasts at the time of its IPO were thoroughly explained in the company’s market disclosures including its prospectus, which was the subject of a thorough due diligence process involving leading law firms, internationally recognised accounting firms and top tier financial and investment banking advisers.

The joint lead managers and underwriters on the prospectus were Macquarie and Morgan Stanley and the Australian legal adviser was Clayton Utz.

It has previously been reported by The Sydney Morning Herald and other Australian publications that Quinn Emanuel’s Sydney office and Phi Finney McDonald in Melbourne are also investigating a class action claim, with Lawyerly this week describing Shine Lawyers as “the first to pull the trigger on a class action.”

You may also be interested to read: https://www.legaltechnology.com/2021/06/21/asic-confirms-nuix-ipo-investigation-as-ceo-and-cfo-depart/

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