Xero's Drury downplays US float talk

Rod Drury, Xero chief executive.

Xero chief executive Rod Drury has poured cold water on speculation about developments in the company's US listing plans, saying an Australian media report is "wildly inaccurate".

The Australian Financial Review reported today that the New Zealand accounting software developer was working with investment banks Credit Suisse and Morgan Stanley as it prepares for an expected $500 million to $1 billion US initial public offer.

Xero has previously flagged its intention to carry out a Nasdaq listing next year.
Speaking from the US, Drury said he didn't understand what the $500 million to $1 billion range in the AFR report was referring to.

He said Xero was not looking to raise new capital through a US listing and pointed out that the company's NZX market capitalisation - currently $2 billion - is well above $1 billion.

Xero was not working with Credit Suisse and Morgan Stanley on the US IPO plan, Drury said.

"I don't know where this stuff comes from. It hasn't come from us. It's certainly wildly inaccurate."

Asked whether he had met any investment bankers during his current US visit, Drury said: "I've met with all sorts of people on all sorts of topics."

He said Xero may do a US IPO next year "if conditions are right".

"And we don't need capital," Drury said.
Xero shares were up 1.6 per cent at $16.15 in early trading today.

Xero is targetting one million customers, and 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 per cent 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 per cent from its March highs, as a shift in global sentiment has seen investors re-evaluate valuations of tech-based, momentum stocks, like Xero.

- Additional reporting BusinessDesk