Xero eyes possible A$1 billion float in US, media reports

Wednesday 22nd October 2014

Xero, the cloud-based accounting software company, is moving ahead with plans to list in the US with an initial public offer of A$1 billion flagged, according to media reports.

The Wellington-based company has engaged Morgan Stanley's global team to help it with a US float valued between A$500 million to A$1 billion and planned for the end of next year, according to the Australian Financial Review. A spokeswoman for Xero declined to comment on the report, other than to say "we're looking to list in the US when the timing is deemed right".

Chief Executive Rod Drury told The National Business Review Xero may list next year and that engaging with banks would be the "normal process", without giving any further detail. A US IPO was flagged at the company's annual meeting in July, once the company had reached US$100 million in trailing revenue.

Xero wants a million customers, and is targeting growth in the US market where it sees the potential to take market share of an estimated 29 million small to medium sized business owners. Just 22,000 of its total 371,000 customers are based in the US, where it thinks the transition to cloud-based services "will play out over several years", with most American accounting firms focusing on compliance and are "only at the beginning of the transition to the cloud and proactive advisory services."

Last October the company raised $180 million in new capital to fund its US growth plans. The escrow period for those shares recently wrapped up, giving the stock more liquidity.

Shares of Xero rose 1.3 percent in morning trading to $16.10, giving the company a market capitalisation of $2.06 billion, below the $5.9 billion it recorded in March when the stock soared to $45.99. The stock has fallen some 65 percent from its March highs, as a shift in global sentiment has seen investors re-evaluate valuations of tech-based, momentum stocks, like Xero.

BusinessDesk.co.nz

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