Xero to double staff after capital-raising
Wellington software firm Xero, which plans to take on hundreds of new staff, has received a huge vote of confidence from United States and Kiwi investors who have shelled out $180 million for an 8 per cent stake in the firm.
The capital-raising is a riposte to Xero's naysayers, who have argued that a loss-making company which last year turned over less than $40 million cannot possibly be worth more than $2 billion.
US investors, including Matrix Capital Management - an early investor in Apple - and PayPal co-founder Peter Thiel, bought $147m of the new shares on offer.
Xero makes cloud-based software that lets businesses manage their accounts over the internet.
Founder and chief executive Rod Drury said the "massive war chest" would let the company double its 584-strong workforce over the next 18 months and speed up its expansion in the United States and British markets. Xero would take on "hundreds" of new staff in Wellington.
Xero is already the 10th most-valuable Kiwi firm on the stock market with a market capitalisation of $2.3b, more than either Air New Zealand or Trade Me.
Its shares jumped 10 per cent yesterday after the capital-raising was announced, bringing it within a whisker of also outvaluing Sky Television and casino operator SkyCity.
Investors who bought shares in Xero when the company floated in 2007 would have seen an almost 2000 per cent return. But some of them said yesterday that they were still in no mood to sell.
Palmerston North travel company owner Steve Lee bought 3000 shares when Xero floated for $1 in 2007 and picked up another 3000 at 90 cents each shortly afterwards.
At yesterday's closing $19.70 the shares were worth more than $118,000, but he was not selling. "It is difficult to keep your nerve when people are criticising, but I see what they are trying to do and I am going to sit in there for the ride."
Another private investor who bought 25,000 shares at float time, and during a subsequent rights issue, said he sold 15,000 when the shares hit $12, netting a profit of more than $165,000.
Some investors might reduce their stakes if Xero shares hit $20 - "a psychological benchmark". But he was waiting for the share price to reach $50.
Forsyth Barr analyst Andrew Harvey-Green said Xero's shares had jumped each time the company had raised more money, reflecting the "quality of the investors" buying in.
- © Fairfax NZ News
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