It has been a rocky road since Nuix Ltd (ASX: NXL) commenced its journey on the ASX… and not the chocolatey, delicious kind. After listing in December last year, the Nuix share price has suffered a dramatic 70% fall.
At the time of writing, shares in the intelligence software provider are up 0.80% to $2.52.
Despite the devastating share price destruction, one asset manager is excited by the embattled company's future potential.
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Lower Nuix share price increases expected return
While other fund managers have been jumping ship, ECP Asset Management is delving deeper. Dr Manny Pohl, who originally founded Hyperion Asset Management, is now Chairman and Chief Investment Officer of ECP.
According to a notice on 9 July 2021, ECP has become a substantial shareholder in Nuix. The asset manager is now the third-largest shareholder with $37.5 million worth of skin in the game.
In an interview with The Sydney Morning Herald, ECP Director Jared Pohl revealed the rationale behind the continued strong conviction.
While the issues ventilated in the press are not ideal, and the company needs to work through those issues systematically, nothing yet suggests that our thesis is broken.
Adding to this, Mr Pohl explained that the focus of ECP is ensuring the outlook for the core business remains intact. The importance rests on Nuix demonstrating an ability to deliver on expectations moving forward.
All else being equal, as the share price has declined, our expected return has increased and so we believe that we are able to buy the company now at a much more attractive price than we were able to when it listed.
Furthermore, the fund manager drew similarities between Nuix and ASX tech darling, Altium Limited (ASX: ALU). Specifically, Pohl described the difficulty for both in shifting from module-based subscription revenue to consumption-based contracts.
Shareholder activity
There has been a huge amount of buy and sell activity from major shareholders and insiders of Nuix shares in the past 3 months. Interestingly, the buy-side has outweighed the sell-side. Nearly 110 million Nuix shares were purchased, while just over 86 million were sold.
Despite this, the Nuix share price has continued to slip ~51% between 16 April 2021 and today. At the time of writing, the company's market capitalisation is $793.3 million.
