Xero announces strategic placement of NZ$23.2m

Exciting moment for our team to be able announce that we have raised additional new capital from strategic investors.  We are putting in place a Share Purchase Plan for existing investors to thank them for their support to date.

You can read the detail here:

Xero announces strategic placement to further scale the business (pdf)

Happy to take questions and we’ll answer them as best we can.

30 Comments

Katie
April 7, 2009 at 11:29 am

Is there limit for existing shareholders on the amount shares they can be purchase?
Example for every 4 Shares already purchase you can purchase 1 more share at the discounted rate?

Rod Drury
April 7, 2009 at 11:32 am

There is a limit normally under SPPs. We’ll be sending out all the information to existing shareholders over the next few days.

We’re not doing it to raise additional money but we thought it was important thank our early supporters.

Simon T
April 7, 2009 at 11:35 am

Congrats, quite an achievement given the current market conditions. Obviously the key strategic investors have a lot of faith in where Xero is going and hopefully they can also provide Xero some new opportunities and market insight.

Any rough idea on when the details of the SPP will be released?

Ben Kepes
April 7, 2009 at 12:02 pm

Craig Winkler obviously brings an immense amount of accounting software industry experience. Do you envisage a role for him (pending shrareholder approval of the placement of course) on the board?

Bruce
April 7, 2009 at 12:35 pm

Is it all cash? I thought it must be until I read the part that says Craigs advisors will be investing $450k (in cash). Was there a reason that ‘in cash’ statement needed to be specifically stated there?

Charles Widdicombe
April 7, 2009 at 12:45 pm

What is the rationale of the BNZ becoming equity investors instead of a debt provider? Is the next product SaaS banking?! ;o)

Rod Drury
April 7, 2009 at 1:24 pm

That’s a board decision once we have approval. Personally I would love to have Craig involved as much as he can.

Galen King
April 7, 2009 at 2:34 pm

Can you clarify what this means for early investors—in simple terms?

Rod Drury
April 7, 2009 at 2:41 pm

The value of their shares go up.

Normally an SPP is put in place to protect smaller shareholders in a dilution. While this isn’t so relevant on a strategic placement that creates value such as what we have announced, we feel it is important to look after those shareholders.

That means that existing shareholders have the ability to buy some more shares at the same price as this round (90 cents). Details will be sent to shareholders sometime over the next week or so to explain how they can participate.

We place a lot of importance on looking after our shareholders, which is why we think it’s a good thing to do.

Hope that makes sense.

Rod

Anna
April 7, 2009 at 4:27 pm

How many new shares will be issued?

Caleb
April 7, 2009 at 6:31 pm

Craig is an Australian does this mean that zero is not really a NZ sucsess story… Seems now its moving to overseas control – do you think with MYOB’s past record this could the first stages of a take over attempt….

Rod Drury
April 7, 2009 at 10:56 pm

@Anna It must be 23.2m / .90 so around 25.7m

@Caleb

1. Xero is a global company with many international shareholders, but we are listed on the NZX, create jobs here and in other countries and pay tax in New Zealand. The vast majority of our shareholders are from NZ.

2. Craig is no longer involved with MYOB and will add significant value to Xero. We are building a long term business and will continue looking for partnerships. We have far too many cool things to do for small business owners to even think about a take over. Been there done that.

@Bruce. Yes all cash. That passage was needed because of how CW had engaged his advisors.

@Charles

1. Pre profit companies like Xero are still difficult to fund via debt. We’re very appreciate of the ongoing support of the BNZ and NAB group in general. I think it’s awesome that a bank supports a hi-growth company like this.
2. What we’re doing is blurring banking services with small business workflow. Expect to see much more of this in the future. Online banking is one of the first scale examples of SaaS.

Rod

Tim Norton
April 8, 2009 at 12:00 am

Very strategic investment for all, I’ll pick up a few more in this round, and wrapped to have this amount of money and Craig/ex MYOB founder on the register and possibly more.

Exciting move, and great to see the right amount of money needed to let you and the crew keep taking this to the next level.

Chris Milne
April 9, 2009 at 7:45 am

The founding shareholders have put a lot of faith in the business and people and ought to be offered a decent tranche of shares at 90 cents. The Xero business model is more proven than it was two years ago and there ought to be reward for those who stuck their necks out early to get the business off the ground. So we are looking for a good sized SPP Rod!

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Tim
April 14, 2009 at 11:13 am

the NZX SPP announcement does not state what quantity limits will be in place – What limits are there?

Lucy Hempseed
April 14, 2009 at 12:40 pm

Hi Tim,

We’re just finalising the details around the SPP and willl be communicating this to the NZX, shareholders and on our website in the next few days.

Tim
April 15, 2009 at 5:49 pm

Thanks Lucy,

How many shares does one need to own, to be an eligible share holder?

Paul Lattimore
April 15, 2009 at 6:38 pm

Guys,

Do you still plan to issue regular market statements regarding user volumes? The 1-2000 new user updates are pretty old hat now, but updates for every 5 or 10,000 block would be much appreciated.

Rod Drury
April 15, 2009 at 6:48 pm

@Paul You know that we are very open about our information and have every intention to continue that approach.

You have no idea how happy it makes us for you to say that 1-2000 users are old hat.

Rod

Katie
April 16, 2009 at 12:28 am

If I purchase 200 Shares through my online broker which is the minimum need to purchase if the stock price exceeds $1.00 and under $2.00 per share. Can I then take park in SPP and spend another $5000 and purchase 5555 shares at 90 cents?

Harry
April 16, 2009 at 8:49 pm

Hi Rod,

You mention the word users, the term has previously been referred to as customers. I have always taken an assumption of what this means but can you please clarify what a user/customer is?, and has this definition ever changed?

If I have 2 subscriptions am I 1 or 2? What if I have 2 users able to access one of the subscriptions, is that 1, 2 or 3?!

Rod Drury
April 19, 2009 at 5:33 pm

Hi Harry, sorry we probably use the terms interchangeably but to be clear:

We’ve never talked about discrete users. Our customer count is organisations that pay. If you run two entities on Xero we count that as two customers. They may have 10 users that can access those two organisations but we don’t talk about that as it’s not an indicator of revenue growth.

Where user count does become more interesting will be when we kick off a referral program because it gives us many more people to help spread the word.

We also don’t count customers until we have billing details. So any trial customers are not counted. Also all numbers we publish are net of churn (which is very small anyway).

So we take a conservative and responsible approach to counting customers.

Hope that makes sense,

Rod

Cecil
April 24, 2009 at 1:09 pm

Hi, the share price dives from $120 to $114 today but still indicating rising 9 cents for the day. Is it somehow related to the Share Purchase Plan?

Rod Drury
April 24, 2009 at 2:08 pm

Might be a glitch on the NZX site. We never look at the share price so didn’t notice it :)

Cecil
April 24, 2009 at 3:08 pm

Very interesting glitch. I think I should have asked NZX instead.

As the company announced, the whole capital raising activity is to scale the business and expand its oversea market. But it did not give much detail in how the business will do with these extra cash. I guess increasing marketing and extended operation would be the major cash burner. I wonder if more detail would be given in the future (maybe in the annual report) if possible?

Rod Drury
April 24, 2009 at 3:27 pm

Hi Cecil, yes the Annual report is the logical place for us to get that information out there.

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