Paul Harrison, managing director of Salt Funds Management, said it was preparing to talk to other investors to back a letter to Xero urging them to stay NZX-listed.
Harrison said there was a high level of frustration among local fund managers over Xero's decision.
"The logic of what they are proposing doesn't make any sense," he told Stock Takes this week.
Harrison said it would only take 5 per cent of Xero's investors to band together to force the company to hold a special meeting to vote on the issue. "That would be quite easy to get to."
While Harrison is prepared to go all the way he is hopeful the company will change its mind and bend to the pressure before it gets to that point.
And it seems Salt is not the only one preparing to take action.
Two-pronged tactic
A second group of fund managers are also gearing up to push for a vote to stop Xero leaving the NZX.
One market player said he believed Xero had received some bad advice from Australian brokers and the ASX which had convinced them to leave the NZX.
Stock Takes understands Xero's chief financial officer told a UBS conference this week that part of the reason it is leaving is because it doesn't want to become forced by its shareholders to make an after tax profit so it can pay a dividend.
The argument is that Xero is a fast-growing company and it makes more sense to leave capital in the company so it can be reinvested in more growth.
There is a view that the Australian market is more open to growth-orientated investors.
While the NZX does have a reputation for strong dividend paying companies that hasn't stopped investors backing Xero's growth story.
The majority of Xero's trading is still done via the NZX. Around 250 million shares trade via the NZX versus around 90 million on the ASX.
Harrison said he was not convinced: "They may end up being a very illiquid stock," he warned.
If a special meeting is called it is hoped it would be held before Christmas but the timeframe would be up to Xero to decide.
Xero shares closed up 33c yesterday at $33, but are down from the $34.70 closing price on Wednesday last week before its announcement was made.
Tower's conundrum
Tower's $70.8 million capital raising announcement came as no surprise to the market this week.
But some are questioning whether it will be enough and what cornerstone investor Suncorp's long-term plans are.
Suncorp, which owns 19.9 per cent of Tower, has committed to taking part in the capital raising, which will mean it maintains its stake at about the same level.
The Commerce Commission turned down Suncorp's bid to takeover Tower earlier this year citing competition issues with Suncorp's New Zealand business already being the second largest player in New Zealand's general insurance market.
One market source said people were questioning how long Suncorp would stay invested in Tower.
"Most, despite what they say, believe this is not long term given they haven't been minority shareholders in anything previously."
Investors were advised to remain wary of how Suncorp may exit Tower, he said.
There are also questions around what the Commerce Commission will do about Suncorp's stake in Tower, which could potentially be used to block other bidders.
The commission's report mentioned other buyers for Tower but so far none have emerged.
Fairfax Financial, the Canadian firm which had its bid for Tower trumped by Vero earlier this year, has not made any move to try for another offer.
In terms of the capital position Tower said in its statement that if the $70.8m was applied to its solvency position as of September 30 it would be $123.4m or 300 per cent above its minimum requirements.
The big uncertainty remains how many more Canterbury Earthquake claims it will receive.
Tower shares closed unchanged yesterday at 70c and are down 7c over the last year.
