The Xero Limited (ASX: XRO) share price fell 3% on Thursday morning after revealing a US$300 million convertible notes offering (due 2023) and an FY19 trading update.
Xero is one of the world’s largest cloud accounting software businesses.
The Xero Convertible Notes:
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Xero plans to use the net proceeds of ~US$242 million, after paying for items such as certain debt, to fund potential acquisitions and investments into strategic and complementary businesses.
The notes will have an interest rate of 2.375% per year, will be listed on the Singapore Exchange and are due 2023. The initial conversion price of the notes is US$46.3386 per share, which represents a 30% premium.
Xero CEO Steve Vamos said: “This structure has been adopted to drive the right balance between providing flexibility for Xero and reducing potential dilution of existing shareholders.”
According to Mr Vamos, global demand for the offer was very pleasing.
The Trading Update:
Xero expects cash outflow in FY19 will reduce compared to FY18. Before taking into account of recent acquisitions and alliances, Xero said that revenue would be between NZ$528 million to NZ$558 million, which compares to NZ$406.6 million revenue in the FY18 report. Underlying EBITDA (click here to learn what EBITDA is) is projected to be NZ$66 million to NZ$94 million.
Despite being down today, the Xero share price is up 80% over the past year.
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