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Xero taps major shareholders for $20m, buys rest of Max Solutions

Rod Drury, founder and CEO of Xero. Photo / Hawkes Bay Today.
Rod Drury, founder and CEO of Xero. Photo / Hawkes Bay Today.

Xero, the cloud-based accounting platform provider, raised $20 million in a placement to major shareholders and will offer new shares to other investors at the same price after electing to chase global revenue growth at the expense of profits.

Shareholders including Trade Me founder Sam Morgan, Sam Knowles, MYOB co-founder Craig Winkler and Paypal co-founder Peter Thiel bought more shares at $2.75 apiece. Xero stock reached a record $3.06 early last month and fell 0.7 per cent to $2.92 today.

The company plans to offer other shareholders on the register as at February 14 the ability to subscribe for up to $15,000 of shares each, with share purchase plan documents to be sent out later this month.

At Xero's annual shareholders' meeting last year, chief executive Rod Drury said the company had abandoned its target, given in 2009, of reaching break-even in 2011, "given the size of the opportunities available."

He said this didn't amount to a change of strategy and gave Xero "the flexibility to pursue options that will add shareholder value without being constrained by short-term profit guidance."

The company gets about 50 per cent of its sales overseas and said growth in offshore sales was one of the main drivers of its forecast jump in revenue this year.

Separately today, Xero said it had acquired the 84 per cent of Auckland-based software company Max Solutions that it didn't already own. The total acquisition cost was $2 million in cash and $4 million in Xero shares that will vest over three years.

- BusinessDesk

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