Xero raises $35.6m

UPDATE March 8: Xero has raised a further $15.6 million through its Share Purchase Plan (SPP), bringing the total capital raised in recent months to $35.6 million, the company said in a statement to the NZX this afternoon.

The SPP appears to have exceeded expectations. On February 2, Mr Drury said he expected the offer to bring in $5 million to $10 million.

Following a $20 million private placement in February (detailed below), the SPP was initiated to enable existing shareholders to increase their shareholding at the same price of $2.75.

Xero [NZX:XRO] was flat in late trading at $3.13.

Xero 12-month chart courtesy CapitalIQ. Click to zoom.

Xero raises $20 million, buys practice management company

Feb 2: Online accounting software company Xero has raised $20 million to fund global growth, offered a shareholder purchase plan and acquired a practice management company.

In a busy day for announcements on the NZX, Xero [NZX: XRO] said it had raised $20 million through a placement to strategic investors, including independent director, Rich Lister and Trade Me founder Sam Morgan, independent chairman Sam Knowles, director and co-founder of MYOB Craig Winkler and Valar Ventures, the New Zealand investment vehicle of Paypal co-founder and Facebook investor Peter Thiel.

Xero said the placement would assist in accelerating its growth in large overseas markets, including Australia, the United Kingdom and the United States, as growth in regions outside New Zealand had been one of the main drivers behind the company’s forecast of doubling its 2011 revenue of $9.3 million for the year ended March 31.  It said 50% of its committed monthly revenue, which was $1.75 million or $21 million annualised, came from offshore.

The placement price of $2.75 per share represented a small premium to the volume weighted average share price of Xero at the time the investors were approached, Xero said.

Xero’s board also offered a shareholder purchase plan in addition to the placement to give New Zealand-based shareholders the opportunity to acquire new Xero shares under these same terms.  Shareholders on the share register by close of business on February 14 could subscribe for up to $15,000 of additional shares, the maximum amount permitted under NZX Listing Rules, it said, at $2.75 per share.

$5m - $10m more to come
Xero chief executive Rod Dury said the SPP was open ended, but he anticipated it could raise a further $5 million to $10 million.

Asked if the new placements would dilute the value of Xero shares, Mr Drury said. "That's the trade-off [for raising money through issuing new shares]. But it's a relatively small dilution."

Xero also said it had taken full ownership of software developer Max Solutions Holdings, after investing $200,000 in 2010 to take a 15.9% stake in Max Solutions, the company behind WorkflowMax, an online job, time and invoice management solution, which would be added to Xero’s portfolio of products.

The total cost of the acquisition was $2 million cash and $4 million of Xero shares, vested over three years, Xero said.

“Max Solutions founders Gavin George and Chris Spence will become part of the Xero team and will bring with them all other Max Solutions staff.”

Xero shares [NZX: XRO] were up 3.74% to $3.05 in midday trading.