Xero "very pleased" with broker backing

Tuesday 9th November 2010

Xero is "very pleased" with the support the company has received from the broking community and rejects suggestions it has struggled to get institutions on board, says chief executive Rod Drury.

He was responding to a BusinessDesk article in which he said local investors were “yet to understand the cloud-based model” and that while Xero talked to local investment community “quite a bit” they hadn’t yet followed through with funds.

Shares of Xero have traded at a record $1.81 in the past two days, having soared 22% since PayPal co-founder Peter Thiel announced last month he had bought $4 million new shares at about $1.49 apiece. The stock was unchanged at $1.79 today.

“I don’t think that there is any doubt that we are champions of the local markets and we are very pleased with the support of the broking community in our early stages,” Drury said in a statement to the NZX today.

Under Xero’s growth strategy, the business isn’t forecast to break even until the second half of 2011 and it burned through $12.9 million in the financial year to March 31, when sales amounted to just $3.4 million. Xero is betting on demand for its cloud-based accounting package aimed at small and medium businesses to win sales in New Zealand, Australia, the UK and the US.

Bank of New Zealand is listed with a 2.5% holding and Accident Compensation Corp., which typically allocates a portion of funds to smaller equity investments in New Zealand, had 0.8%, according to the 2010 annual report. Drury’s interests hold 27%.

Drury said First NZ Capital had supported the company with two research notes. The brokerage was one of the organisers of its 2007 initial public offering, where the stock was sold at $1 apiece.

Xero releases its first-half results on Thursday.

Businesswire.co.nz

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