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Xero's ASX listing prospectus sees more losses

BUSINESSDESK: Cloud accounting software firm Xero expects to make more losses in its push to become a global player and may raise more cash to pay for those plans, its prospectus for a secondary listing on the ASX says.

The Wellington-based company lodged its prospectus for admission on the official list of the Australian Securities Exchange as a secondary listing, but does not plan to raise fresh capital at once.

It says it expects to make more losses and may seek more funds to pay for its global aspirations, according to risks relating to investing in the firm.

"Xero will be very much focusing on establishing and then growing its business," the prospectus says. "Accordingly, it expects to make further losses and have negative cashflow in at least the short term."

The company abandoned its goal to reach profitability last year, instead pursuing a growth strategy that's seen first-half revenue more than double to more than $16.7 million in the six months ended September 30.

Xero says it may need additional funding to maintain or expand its business, which the prospectus identifies as a risk the possibility such funding might not be on favourable terms, if it is available at all.

Chairman Sam Knowles says the ASX listing will help facilitate Australian investors in the firm, where interest in the business as an investment has grown with its expanding customer base across the Tasman.

"Australia has over 1200 accounting partners for Xero countrywide and has recently surpassed New Zealand as the fastest-growing region for Xero internationally," he says. "As a consequence, the interest in Xero as an investment opportunity has also increased."

Xero shares were unchanged at $5.35 today, and have surged 94% this year. The stock is closely held, with 58 shareholders of the 2924 owning 82%. Founder Rod Drury holds 21% and director Craig Winkler a further 20%.

The company tagged Mr Drury's retention as a key risk, saying the company had been dependent on him in its initial stages, and that his loss "for whatever reason, could have an adverse effect on Xero and its future prospects".

Comments and questions

It also lists as a risk the continual support of the internet. The 'risk section' just seems to list everything these days, even if they are remotely possible just to protect the directors.

Every business faces risk of lost power. This is critical too. :)