MYOB founder helps Xero raise $23m for global push
Local software company Xero has launched a $23 million share issue plan to fund overseas expansion, with the founder of accounting software company MYOB putting up most of the cash.
The company is looking to raise $23.2 million in capital from key strategic investors by offering them shares at 90c each.
Although shareholders face dilution with the capital raising, the share price has finally clawed its way back up over its IPO price of $1 in the past week, thanks largely to its announcement that it was looking at significant capital raising and its confirmation of a major deal with Telstra.
Xero shares (NZX: XRO) were at $1.15 in midday trading.
Chief executive Rod Drury tells NBR that the business is now gaining traction with investors after proving that it was on the right path and the involvment of MYOB founder Craig Winkler as a strategic investor would raise the company’s profile in Australia even further.
Mr Winkler, who founded the accounting software company and was a major shareholder before the business was recently acquired by private equity investors, has subscribed for $18 million of the new Xero shares.
There is some irony Mr Winkler's investment, given that MYOB has been trying to copy Xero's software-as-a-service model, and is arguably its keenest foe in the Australasian market.
In making its announcement, the company noted it had no debt on its balance sheets and that the capital was required to fund “significant market opportunities” that it had identified, unlike other recent fundraisings where companies were looking to repay bank debt.
Late last month the company announced that it had signed up 6000 customers, double the customer numbers at the end of last year and last week it revealed it had entered into a strategic partnership with Telstra in Australia.
The raising of new capital is designed to help Xero to push further ahead in the UK and Australian markets and enter the US market.
Mr Drury says the international expansion is already underway, with 2000 customers in the UK and the Telstra relationship kicking off in the next few months.
“People are starting to take note of how we are doing and there has been a lot of positive reaction to the announcement that we have doubled out customer base.”