NZ's biggest tech company jumps ditch to Sydney after 3000% rise
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NZ's biggest tech company jumps ditch to Sydney after 3000% rise

New Zealand's stock market has become too small for Xero, whose market value has soared about 70-fold to $NZ4.28 billion ($3.9 billion) since its debut a decade ago.

The maker of cloud-based accounting software last month said it was leaving for a sole listing in Sydney, where the shares have traded since 2012.

Rod Drury said one big fund took almost a year to sell a stake in Xero.

Rod Drury said one big fund took almost a year to sell a stake in Xero.

Xero, which is keeping its headquarters in Wellington, billed the move as a graduation of sorts, saying the move would improve trading in the stock, increase analyst coverage and draw bigger investors.

Losing the listing of its biggest technology company is another blow for Asia's smallest developed market, which is already plagued by low liquidity and transparency. Off-market transactions, when brokers make deals directly with each other rather than putting in orders publicly, dominate trading.

"It's difficult for investors to place a big bid, it's difficult for them to get the stock and it's difficult for them to exit the stock," Xero founder and chief executive Rod Drury said, citing the company's liquidity across multiple markets. One big fund, he said, took almost a year to sell a stake in Xero.

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The departure of Xero, which accounts for 3.8 per cent of exchange operator NZX's equity turnover as its 10th largest company, may hurt trading volume.

The exchange operator posted an 8.2 per cent drop in securities trading revenue for the six months through June. Xero's decision follows jeweller Michael Hill International's move last year to transfer its primary listing to Sydney from Wellington.

One selling point for New Zealand's stock market is its performance.

The benchmark S&P/NZX 50 Gross Index is trading near a record and has climbed 22 per cent in 2017 in US dollar terms, outperforming the S&P 500.

Companies such as A2 Milk, Fisher & Paykel Healthcare and casino company SkyCity Entertainment Group were fulfilling global ambitions with a listing in Wellington, NZX said.

Still, each of those also trade in Sydney, where ASX has processed more than $US975 billion in trades this year, compared with NZX's $US29 billion, data compiled by Bloomberg show.

'Well placed'

Xero shareholders who own the Wellington stock will get an equal number of shares in Sydney in February.

It's difficult for investors to place a big bid, it's difficult for them to get the stock and it's difficult for them to exit the stock.

Xero founder and CEO Rod Drury

The sole listing is effective from February 5. The shift makes Xero "well placed" to be a potential addition to the benchmark S&P/ASX 200, Morgan Stanley analysts wrote in a note last month, saying liquidity in the stock will need to increase to win inclusion.

The company's share price has risen almost 3000 per cent since it went public.

That could lead to the "bigger pool" Mr Drury wants to get into and attract investors backing the likes of Amazon.com and Alibaba Group, stocks that trade in New York.

The biggest technology company based in the antipodes, Atlassian Corp, is also listed in New York, debuting on the Nasdaq Global Market in 2015. Xero also trades in the US but only over the counter. For now, the company said, the focus was on the Sydney listing.

Bloomberg

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