Kiwi cloud accounting software group, Xero has stunned the New Zealand investment community by deciding to delist from the NZ stock exchange and rebase its primary listing on the ASX from early 2018.
The company has been one of the stars of the NZX, but from comments yesterday from founder Rod Drury, its the attraction of the bigger market in Australia and the chance to joint the ASX 200.
The switch will see Xero become solely listed on the ASX from January 31, 2018 and it will delist from the NZX from February 2 next year.
Xero’s news saw the shares sold down across the Tasman, falling more than 4% in early trading before steadying to end down 1.8% at $NZ33.41 (The shares fell 1.2% on the ASX to $30.59). That’s despite the company remaining headquartered in Wellington and domiciled in NZ.
Up to yesterday Xero shares have risen 50% in the past six months.
The fall yesterday was despite the company revealing its first ever positive earnings.
Xero posted a positive earnings before interest tax depreciation and amortisation (EBITDA) result of $NZ5.4 million, compared to an EBITDA loss of $NZ25.9 million in the first half of its 2016-17 year.
Mr Drury says Xero’s Kiwi investors would benefit long-term from the move, despite acknowledging they would now be slugged with a currency conversion fee every time they transacted on their shares.
"Having our liquidity spread across two markets was preventing us from accessing all the new investors now attracted to us because of our growth," Mr Drury said.
"Having an NZX listing hasn’t hampered us at all to this point, we’ve got global funds managers and hedge funds on our book, but we’ve now reached a scale where consolidation is critical to our ambition to be the leading global small business platform serving millions of customers."
Xero sits today in the ASX300 index, and Mr Drury expected a promotion to the AX200 – and the index inclusion rise in the share price that goes with it – would occur next year.
“It’s a matter for [index constructor] S&P of course, but we’re looking forward to moving up through all those indexes, he told a teleconference yesterday.”
Drury said the shares held by Kiwi shareholders would transfer automatically to the ASX listing.
Xero is the sixth-most valuable Kiwi company on the NZX, having had a market worth of just over $NZ4.7 billion prior to the announcement yesterday.
It accounts for about 3.6% of the total market value of the NZX’s main board. Shares in the NZX fell around 1.3% yesterday as well.
