Nuix Ltd (ASX: NXL) announced this morning a search warrant was executed at the firm’s Sydney office.
Officers were “seeking documents in relation to an investigation into the affairs of an individual”. The person of interest was not named.
The company understands that the investigation does not relate to any wrongdoing by Nuix.
The market has reacted negatively to the news, with the share price down 2.87% to $2.53.
NXL Share Price
What were the police looking for?
The announcement did not disclose any details about the individual or nature of the investigation. However, Nuix been making headlines lately.
A joint investigation by The Sydney Morning Herald, The Age and The Australian Financial Review revealed gaps and contradictions in Nuix’s records.
The Australian Financial Police (AFP) has been investigating potential breaches of the Corporations Act by co-founder and previous Nuix consultant Tony Castagna.
Castagna received a $3,000 options package, which resulted in an $80 million gain for the past director. However, the options were not reported in company statements from 2005 to 2011, therefore, breaching disclosure responsibilities.
Another potential reason for the search warrant centres upon ex-CFO Stephen Doyle. Doyle reported in September 2012 to the Australian Securities and Investments Commission (ASIC) he had received 50,000 shares in Nuix.
Then in 2015, Doyle notified ASIC he had sold those same 50,000 Nuix shares to his brother who resided in tax-friendly Switzerland in July 2012. This could not be possible, given he only reported owning the shares in September.
Doyle’s employment contract was terminated by Nuix last week along with the announcement that CEO Rod Vawdrey would step down.
My take
For most companies, the AFP searching their head offices would be the front page of the paper. Not for Nuix. Today’s market announcement wasn’t even listed as market sensitive.
This is symbolic of the turbulent ride shareholders of Nuix have endured.
Today’s police search is just another string to the bow of an already long list of issues including two guidance downgrades, media allegations of governance and cultural issues and a Section 19 notice issued by ASIC.
When the company announced the departure of the CEO and CFO last week, I was cautiously optimistic these exits would signal the turnaround of the business.
Seems like the Nuix soap opera has a few more episodes to go.
