A local fund manager has slammed Xero's decision to leave the NZX and another says it is a psychological blow to the New Zealand share market.
But Xero chief executive Rod Drury says Kiwi investors will benefit from the move and the NZX is still a good place for tech firms to list.
The accounting software company, which is one of the largest companies on the NZX outside the banks and the Fonterra Shareholders Fund, this morning said it would stopping trading on the New Zealand share market at the end of January and de-list on February 2.
Xero listed on the sharemarket in 2007 raising $15 million with a $1 issue price. Since then they have risen to over $33 giving the company a market capitalisation of $4.6 billion.
James Lindsay, senior portfolio manager at Nikko Asset Management New Zealand, said the move was disappointing and disrespectful.
"I am terribly disappointed in the management of Xero at the abandonment of the NZX listing."
"Xero is a business started in New Zealand with NZ staff and NZ effort and has many loyal shareholders here for the decade its been listed."
"Many will consider this a disrespectful move to their NZ origins."
Brian Gaynor, executive director of Milford Funds Management, said Xero's announcement would be a psychological blow for the New Zealand share market.
He said it the move should be a wake-up call for the local market.
"It should be an opportunity for us to look and say is there something fundamentally, structurally wrong with our market?"
Gaynor said Xero had raised a lot of capital in New Zealand and there was a lot of money going into KiwiSaver which increased the potential for more investment.
"So why do people like Rod Drury feel like they need to leave?"
Gaynor said the decision would mean local fund managers - including the NZX's Smartshares funds, who only have a mandate to invest in New Zealand-listed shares would have to sell out.
He said it would also put barriers up for New Zealand investors and would potentially mean the number of New Zealand shareholders would reduce over time.
"You will still be able to buy the shares through a New Zealand broker. But it makes it more difficult."
Investors would have to think about currency fluctuations and possibly pay higher brokerage fees to invest in Xeros' ASX-listed shares, he warned.
Matthew Goodson, managing director at Salt Funds Management, said the announcement "was completely left field, particularly with Drury being a former director of NZX."
"It's not as though Xero isn't already trading at a premium," he said.
"At 11 times forward revenues at this stage of its development, that's right up there with most tech companies globally."
But Xero boss Rod Drury said de-listing from the NZX would not change the company, which will remain headquartered in New Zealand, and it would be good for its New Zealand investors.
"We are still the same. It will be really good for them as its creates more opportunity for us as a company."
Drury said Xero was now was one the largest technology companies in Australasia.
The move to consolidate its listing on the ASX was all about getting access to that larger market and to a broader range of analyst and broker coverage as well as bigger investors.
"It's really the next stage of our growth."
Drury said Xero had had amazing support from the NZX and said the exchange had done nothing wrong.
"We have had a brilliant experience with the NZX."
Its departure will leave a major hole in the New Zealand share market which has struggled to stem a flow of New Zealand companies across the Tasman and has little in the way of a pipeline of new firms coming to market.
In October, total equities on the NZX fell 5.3 per cent from a year earlier to 162 and there were no initial public offers (IPOs) or compliance listings.
In the year-to-date, IPOs or compliance listings have amounted to $480 million, dwarfed by the $2.77 billion of new debt securities..
But Drury said there were a whole lot of New Zealand technology companies coming through.
He said New Zealanders should be proud of its exchange and he hoped Xero's growth and success would encourage others to come through and list on the NZX.
"New Zealand tech companies should list locally."
Graeme Muller, chief executive of NZ Tech said Xero's move sent a mixed message to Kiwis and tech start-ups.
"Rod Drury spends a lot of time telling everyone how important it is to keep businesses based in New Zealand if at all possible.
"While this is just where the shares of Xero are traded many Kiwi's and tech startups might interpret this as Xero not being committed to New Zealand."
But Muller said in reality the business would remain headquartered here, thousands of staff would still be employed here and research and development would continue here, so Xero continued to be great for the economy.
"Xero have to make the best decisions for their shareholders and this is simply about where best to trade shares."
An NZX spokeswoman said it was naturally disappointed that Xero had decided to leave the local market
"We are proud of Xero's achievements over the past decade. Its strong performance and support from the New Zealand market has generated opportunities and wealth for local investors."
She said Xero's listing on the NZX had extended beyond the benefits of solely raising capital.
"It has supported Xero's growth aspirations, with the company successfully leveraging its local listing to reinforce its brand and compete globally. NZX is pleased to have played a pivotal role in this."
The surprise announcement came as Xero's earnings went into positive territory for the first time as the accounting software provider shrunk its half year loss to $21.1 million.
The company reported earnings before interest, tax, depreciation and amortisation (ebitda) of $5.4 million for six months to September 30.
Xero's half year loss was down from $43.9 million in the same prior period as the company continued to grow subscription numbers and revenue.
Its added more than 160,000 net new subscribers over the six months growing numbers to 1,199,000 subscribers at 30 September 2017.
-additional reporting BusinessDesk.