Shares of Xero have fallen below $18.15, the price that the cloud-based accounting software firm last year sold its stock at as part of a $180 million capital raising, as those investors come off share trading restrictions.
On October 16 last year, the Wellington-based company issued 9.92 million shares at $18.15 apiece, to Matrix Capital Management, Peter Thiel-backed Valar Ventures and other US investors, as part of a capital raising to fund its growth plans in the US market. The escrow period which prevents investors in the capital raising from selling their shares, ends this week.
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Shares of Xero fell as low as $17.75, and recently traded at $18.05, giving the company a market capitalisation of $2.3 billion, below the $5.9 billion it recorded in March when the stock soared to $45.99. The stock has fallen some 57 per cent from its March highs, as a shift in global sentiment has seen investors re-evaluate valuations of tech-based, momentum stocks, like Xero.
"The market isn't dumb and knows the new amount of stock is essentially freed up for sale," said James Smalley, director at Hamilton Hindin Greene. "Particularly if it is a low liquidity stock, that can't help but have an effect on the short-term shareprice. Obviously the long-term share price is driven by the performance of the business, but in the short-term sentiment and simple demand and supply is what moves share prices."