15 Oct 2013

Foreign investor demand prompted Xero share release

7:45 am on 15 October 2013

Xero chief Rod Drury says investors wanting to buy into the company prompted the release of new shares which have raised $180 million of fresh capital.

The company has sold 9.92 million new shares at $18.15 a share, representing 8% of its shares after the issue.

The last time Xero raised capital was last November, when it sold $60 million worth of shares at $6 a share.

The latest capital-raising will take its cash in hand to more than $230 million. Annual sales are running at just over $70 million.

Mr Drury says that after the company presented to audiences in Sydney, London and San Francisco, it was approached by people he described as "serious investors" wanting to buy into it.

"At our valuation," he says, "we thought without selling too much of the company, it just gives us an extra war chest and sends a signal to people in the US that we are the absolute challenger."

Mr Drury says investors are seeing not just absolute revenue numbers but also the growth and "the buzz" in the industry about the company.

He says it's cheaper to base staff in New Zealand who can target global markets over the internet, and Xero plans to double its Wellington staff from 300 - although finding those new employees could be a stumbling block.

"It's up to us now to find those people," he says. "There's thousands of software developers still. In Wellington we have to convince them that we can create these fantastic product careers and that they should be working on these projects, which really are changing the world globally."

Xero shares rose as high as $19.90 on Monday before closing at $19.70, up $1.75.