18 Oct 2013

Xero shares hit record price

8:59 am on 18 October 2013

Xero shares hit another record on Thursday, closing up 14% to $25.20, valuing the company at nearly $3 billion.

no caption

Photo: RNZ

Earlier this week the accounting software company raised $180 million of fresh capital from new and existing shareholders by selling nearly 10 million new shares at $18.15 per share.

And the company was given a boost when a prominent fund manager, Milford Asset Management, came out and said it had contributed $16 million to that capital raising, as well as Xero having other high profile investors like Peter Thiel.

Craigs Investment Partners head of wealth research Mark Lister says the stock has been strong all year but the recent strength has come this week since they raised that new capital.

He says they did that at an attractive price which was higher than the current trading price, which was unusual because companies generally raise big amounts of money at a discount to attract new investors.

Mr Lister says Xero attracted a good price for that new capital and it attracted some astute well-respected investors.

He says it's been a vote of confidence from some of the major shareholders.

Mr Lister says it's challenging to figure out what Xero is worth and the company has gone from strength to strength in terms of its sales and customer numbers, but it still doesn't actually turn a profit.

He says Xero's current total market value is bigger than that of Sky TV or Sky City which are companies that earn profits of more than $100 million a year.

Mr Lister says people are factoring in an expectation of very strong growth into the future and that at some point the sales growth will translate to tangible profits.