Xero man's share sale coincidental to falling price
"Until there is more liquidity, it wont get institution/broker support."
Featured commentUPDATE:
Xero chief operating officer Alastair Grigg says a large share disposal he did in August is unrelated to today's NZX-questioned drop in share price.
Mr Grigg told NBR ONLINE the timing of his sale was just a coincidence.
"The timing was what it was. It wasn't the highest the share price has been at.
"It was just driven by personal circumstances."
The NZX today asked cloud-based accounting software firm Xero to explain why its share price dropped 16.9% over the past month.
Shares had fallen from $5.20 a month ago to $4.32 this morning, climbing back to $4.40 this afternoon.
On August 11, Mr Grigg sold 124,500 shares at $5.10 – for a total of $634,950 – although this was not disclosed to the market until August 21.
The price dropped a further 70 cents in the five working days following the August 21 disclosure.
The NZX asked Xero if there was any reason for the price fall, but the company said there was not.
Xero stocks have performed well since joining the NZX50 in June at $4.10, rising to $5.70 by July 17.
4.10pm:
Xero today told the NZX it is compliant with the market's continuous disclosure obligations.
The online accounting software company was responding to an NZX Markets Supervision inquiry dated today (August 27) which read, in part
Since your last material market announcement (“Xero Annual Meeting 2012”) on 26 July 2012 the price of Xero Limited Ordinary Shares (“XRO”) has decreased from a market close price of $5.20
to $4.32, being the traded price at 11:22:16 at the date of this letter. This represents a decrease in the price of XRO of $0.88 or 16.9%.
In its brief reply, Xero did not give any reason for the price drop.
In a separate filing, Xero disclosed that its chief operating officer Alastair Grigg sold 124,500 shares at $5.10 for total consideration of $634,950 on August 11.
The transaction wasn't disclosed to the market until August 21.
Xero shares [NZX:XRO] were down 6.6% to $4.40 in late trading, valuing the company at $504 million.
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Comments and questions33
Tardy old NZX - nothing new here
Silence from all the dreamers who have been crowing about this company as the share price was pumped up on minimal trades.
Are they finally realising that the shares were overvalued/overhyped and they have been sucked in by Rod Drurys regular spin.
More tears to come ?
Exactly Doctor
Isn't it funny how the directors and senior staff have been sellers in recent times and nothing from NZX - the new CEO of NZX is as much of a pussy as Weldon was
I think The Doctor might want to prescribe himself some prozac and stop having a go at other peoples success.
The price drop has also been on very small volumes. The problem is too much of the company is tied up with large shareholders.
Until there is more liquidity, it wont get institution/broker support.
I would not buy shares in Xero.
There are plenty of other alternative softwares.
It is a show pony.
Look at the decline in the Rakon share price.
Ever heard the expression, the price has got ahead of itself?
Nothing could be truer here. Management/owners don't set the market price, thats up to punters.
If management/owners believe the price has "got ahead of itself" - aren't they doing the right thing by signalling that to prospective investors? Would you prefer management that just talked up and up share price, regardless of fundamentals?
Grigg probably bought all his shares back today at a much reduced price.
Xero is a very good product. The major shareholders who have bought into this know it. Its highly possible $4.40 is very cheap. Rakon has dodgy directors who are tainted by some of their involvement in PGC. Any association with George Kerr is bad for your share price just ask Heartland.
One day investors in this stock will realise the emperor has no clothes. This is the best short in the market. No wonder the executives have been selling out over recent months.
I'm a CA in public practice. I don't know about offshore but in NZ Xero are quietly getting ahead and knocking MYOB off its perch. I think having dealt with their management team they are dynamic and genuinely ahead of their competition. Their products are better and faster to market as they acquire smart add ons to their base suite. Clever company with good fundamentals if you ask me.
You have to be joking! I'm a CA in public practice too. I didn't get sucked in by the Xero hypoe but it seems you did. I've stuck with MYOB and they are coming back strong with a much better Cloud suite than Xero. Xero is a dog. I have on eclient on Xero and he can't wait to get off it again!
Not sure what Xero's paying you mate. My accountant takes a more pragmatic view. His thoughts: Xero kicked some butt. Woke up the sleeping giant MYOB. MYOB have responded and are now passing Xero in both core functionality and operating costs. Xero have a heapbof add-ons. Most SME's dont need them. MYOB has payroll included. Xero is an add-on in NZ. More cost. Do the mumbers. I think Mr Drury could be likened to the 'Pied Piper' with the mice blindly following not realizing what's happened while their eyes have been firmly shut. MYOB's biggest issue now is getting their message out there. Drury has certainly stolen that march.... For now.
hey CA in public practice. "fundamentals" usually refers to valuation metrics... ie its fundamentally overvalued, which it is, based on its metrics. Good product, no doubt, use it for my accounting as well.
I'll step back into xero again when it becomes a good investment rather than a product I like, part of the art of investing is knowing when to buy and when to sell.
I am also a chartered accountant.
Like many other accountants, I now run a smaller office and get clients to use accounting packages like Xero or MYOB to reduce processing time and fees - no sense in clients paying $125/hr to code bank statements etc.
Xero is a harder software for my clients to use and our experience is that technical support is poor.
I have switched many of my clients back to MYOB as I do not need the hassles of handholding clients.
Good on Xero but it's not for my clients and I.
From an investment perspective the problem we all face when deciding "do we" / "don't we" invest is that the vast majority of the shares are held by a group of less than 100 people, and the majority of these have far better (uncensored) information about the plans and internal mechanics of the business.
Therefore the share price is very much an "at the margin" price, and quite probably an inflated price. If the shareholding was more widely held I would feel a lot more comfortable owning shares.
I do use the software, its good, but wonder how much the demands of US and other markets will lead to feature creep and steeply increasing development and marketing spend, always promising a better future, but one that never quite arrives for the retail non core Xero shareholders.
Having been in the banking and finance, and payments software sectors I certainly have my doubts that Xero will turn a 'real' profit soon. The compliance and integration costs in multiple coyntries is huge! Banks struggle. Can't see how Xero can be that much different. Then there's the USA. Effectively 51 countries in a single country. ROI a long time coming I think.
In my view there was a serious question mark over the new CEO of the NZX when he was appointed. I questioned it and was told to shut up and give him a chance.
Now's his chance.
Good point,there is a breach here. The nzx is a joke, look at how weldon sold his shares pre an earnings downgrade and the stock has reduced by 30%. What will harmos and co do ?Nothing. Come one FMA, get stuck in. Investors who bought weldons shares were wel don...like a dinner!
The Securities Act says that directors and officers MUST disclose buys or sells withing 5 days.
Xero and Grigg have broken the law, where is the penalty? So much for the FMA having teeth, they are just as impotent as the Securities Commission.
This should be an instant $10k fine, I get an instant fine if I break the speed limit. Whats the point of having a law you just look at and directors and officers continually flout it.
Article said "August 11, Mr Grigg sold 124,500 shares at $5.10" August 11th was a Saturday, how could he sell his shares on that day or was it off market transaction? If it wasn't off market transaction how
many days did it take him to sell the shares because there wasn't enough trades done on the day before Friday or Monday to complete the transaction. http://nz.finance.yahoo.com/q/hp?s=XRO.NZ
It is good software, but they've spent a fortune building it, so you'd expect it to be good. But so what....?
I doubt that anyone at Xero wants to get institutional support, and focus the spotlight that would result from those institutions stating the shares are over-valued and electing not to buy.
The second to worst thing that could happen is that they actually make a profit, and crystalise their value....
"It's a really good buy at 16 times projected revenue.... "
Clearly some who own shares are thinking, is the down trend going to continue, and its a self fulfilling prophecy. If pps goes below $4.00, and it looks likely then next stop is $3.00
Markets hate uncertainty, and Mr Grigg added that in spades for the Xero board. They should now just come straight out and say when the trades happened, and apologize for the error in reporting after the 5 day deadline.
Perception is every thing, markets are forward looking with due consideration to past events and the level of trust built up by the exec team.
The 124,500 shares are a trivial quantity, but the number of comments shows that there is plenty of interest in the circumstances surrounding the sale.
I have to question the timing of Grigg's sale of shares - just three weeks after Xero's AGM which is their biggest annual opportunity to hype up the shareprice - and they certainly succeeded in hyping the price up, at least in the short term. This could be construed as a classic "pump and dump" strategy.
I think Xero and Grigg have some more explaining to do.
You're kidding. Xero has been going backwards since MYOB finally reacted.
All you need to so is divide Xero's so called revenue by its so called clients.
They're giving it away!
That is a recipe for success?
Me thinks MYOB has deeper pockets and R&D funding based on revenue and a client base of over 1 million customers. Hats off to Drury and his enthusiasm, resilience and vision. But it's time to come clean and front up to shareholders. At some point investors will be looking for a dividend, rather than vapor ware capital gain.
Sorry - I was replying to #11
This is a disgrace. Griggs late filing of his notice is in breach of the NZX rules...... which state directors and officers must disclose trades within 5 business days. In the meantime the share price tanks. Come on FMA, its time to police these filings properly and punish offenders.
At $5 the next ten year's yield or more has been capitalised.When the CEO says there won't be a profit next year either, rational investors sell. Mr Grigg was rational but Xero does need to get the truth on the table quickly.
Except for those that have brought in at $5. The Morgans and Theils will be looking for a ROI at some point. Are we taking bets Xero will be sold within 5 years - in spite of Mr Drury's insistence that it will remain a NZ company?
Wow.... Am I sensing the love has gone for Xero? Not a lot of happy folks in this forum. Some 'please explains' to Mr Drury. Can't imagine he's a happy chappy either with the sudden fall from grace amongst his usual fan base.
Interesting that Drury is a Director of the NZX. A whiff of something....
I meant to say.... A whiff of something like this and the media are all over it.