As Xero hits all-time high, Brian Gaynor's Milford reveals $16m investment

Milford says a number of its funds, including the Trans-Tasman Fund, Dynamic Fund, Active Growth Fund and Active Growth KiwiSaver Fund, have contributed $16 million to Xero’s recent $180 million capital raising.

Mark Warminger, the co-manager of Milford’s Trans-Tasman Fund, says “Xero is a unique business with huge global ambitions. The $180 million capital raising will fund its aggressive US expansion plans.”

Brian Gaynor, who manages the Active Growth Fund and Active Growth KiwiSaver Fund, says “One of Milford’s founding principals was to invest in New Zealand companies with strong global ambitions. These companies create jobs, economic growth and wealth for shareholders. Hopefully Xero is the beginning of a new trend as far as New Zealand companies are concerned”.

The majority of the funding round - $147 million - came from US investors.

Xero - which is making a loss on annualised revenue of just over $70 million - was at $20.55 in late trading, valuing the company at $2.42 billion.

Xero cracks $20 a share after capital raising, now worth more than SkyCity, Sky TV

Shares in Xero [NZX: XRO] topped $20 apiece when trading opened today, valuing the cloud-based accounting software developer at $2.38 billion, more than casino and hotel operator SkyCity Entertainment Group and dominant pay-TV firm Sky Network Television.

The shares rose 3.91 percent to $20.47, in early trading a new intraday record for a market cap of $2.40 billion, after the Wellington-based company (2013 revenue: $39 million) announced yesterday that it raised $180 million in new capital, mainly from US investors. That's left it flush with $230 million in the bank to fund its global growth plans.

The company sold 9.92 million shares at $18.15 apiece, 1.1 percent above their price last week, to Matrix Capital Management, Peter Thiel-backed Valar Ventures and other US investors. Today's boost means the new shares have already appreciated 11 percent.

The sale represents 8 percent of the enlarged capital of the company and gives it a much wider cash buffer to fund growth as it chases 1 million customers, almost five times its current customer base of 211,000.

Valar and Matrix last injected funds into Xero in November, with $60 million of new capital, while buying $22 million of shares from director Craig Winkler, Drury, and co-founder Hamish Edwards at the same time.

The shares have surged 159 percent this year, and are more than 20 times the $1 they were sold at in the company's 2007 initial public offer. It is now the eighth biggest domestic company on the local stock exchange.

In June, Xero said its tightly held share register led to a volatile price when the NZX questioned a 23 percent slide in the stock.

(BusinessDesk)