Shares in cloud-based online accounting company Xero soared yesterday, propelling the profitless company to $5.2 billion market capitalisation, when its shares touched $41.50, then went on to slump by $955 million in value.
Volatility was huge during yesterday's trading, with shares opening at $39.50, spiralling to hit the $41.50 high and $5.29 billion capitalisation, before plunging $955 in value to close at $34; on 996,000 trades worth $39 million. Xero's shares have increased more than 550% in value during the past year, as it builds its online accounting customers, with huge investor interest coming from its potential success in the huge US market.
Because Xero is now second of the New Zealand stock exchange's top five companies, large funds automatically want to buy stock.
Craigs Investment Partners broker Peter McIntyre said ''index buyers'' such as large institutional investors, investment funds and KiwiSaver funds were all mandated to hold a percentage of company stocks in the top 10.
''The price is partly being driven by index buying, plus media attention, not just in New Zealand but around the world,'' he said.
''The Xero stock is highly sought after. At 1.30pm, about $30 million changed hands.''
The stock was ''tightly held'', with demand outstripping supply, ''driving the price higher'', he said.
Xero chief executive Rod Drury said the company would be happy to stay ''below the radar for a while'', but the profile provided by its rocketing share price was driving sales of its online accounting products, The New Zealand Herald reported.
Asked how it felt to see Xero become New Zealand's second-biggest listed firm by value, Mr Drury said: ''It's not our goal. We'd like to be the biggest company by revenue and that will be some years away.''
Speaking from San Francisco, he said Xero's appearance at an accounting conference in Las Vegas this week had shown how advanced the New Zealand firm's products were when compared with those of its major US competitor, Intuit.
''There were lots of investors there [at the conference] who were checking us out and the feedback we had was extremely positive,'' he said.
