It’s been exciting times in the last few days in Xero-land. First they announced their 31 March figures which showed a doubling of customers over the past three months. The very next day they announced that Telstra, the largest Australian telco, was including Xero in T Suite, it’s packaged suite of SaaS business products. That placement will mean that Xero will be available to over 700 000 of Telstra’s small business customers and should start to ramp up revenue in that market.
To complete the trifecta of positive news, today Xero announced in a stock exchange notice that it is talking to investors about a new round of funding – this comes as the shares, for the first time since shortly after listing, have spiked above the listing price. According to the notice they are;
…in discussions with potential investors regarding a significant capital raising to enable it to accelerate its international growth plans. The potential investors currently comprise a mixture of institutions, high net worth individuals and other eligible investors.
Currently, it is envisaged that the capital raising would be undertaken by way of a placement and would be followed with a share purchase plan (“SPP”) to all eligible shareholders.
Current discussions are on the basis that the pricing of any placement and the SPP will be at NZ$0.90 per share.
The discussions in relation to the potential capital raising are not complete and may or may not be successfully concluded. Xero will further update the market as events develop and this is currently expected to be early next week.
It’s great news to worried investors that had concerns about the significant burn rate that Xero has been showing. Just today I was discussing Xero’s entry into the US market with some US pundits and ruminating on how Xero was going to pay for a large scale push (no matter how segmented that may be) in a market that doesn’t have the same centralised accountant’s networks that New Zealand, Australia or the UK does. This capital raising, should it occur, will fuel another significant round of market development costs.
It’s a good time for another round of funding – the product has been built out sufficiently, revenue has been ramped up to an appropriate level and the business is poised to make inroads into some major markets – I’m sure there are some smiling faces around a board room table in Wellington, happy at the fortuitous timing of all of this.