Stock of the day: why Xero issued convertible notes on Singapore exchange
Xero, a leading software company, has announced the issuance of $925 million in convertible notes to refinance existing debts and fund future growth.
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Stock of the day: Xero (ASX:XRO)
Xero's convertible notes issuance
The focus of today's segment is on Xero, which has announced the issuance of USD 925 million in convertible notes. These notes bear an interest rate of 1.625% per annum and will mature in June 2031.
The primary aim of this issuance is to refinance existing note liabilities and raise capital for potential acquisitions, investments, and general corporate purposes. Although this move is strategic, it is expected to impact the company's financial statements with a loss of around USD 5 million for FY25.
Currently, Xero's shares are down about 4.5% at AUD 126.08.
Long-term growth and market position
Xero has been a strong performer in the market, focusing on recurring revenue and cloud-based solutions. The company has implemented price increases yet continues to see subscriber growth, indicating a high-quality product.
Despite a high PE ratio, the consensus target price is AUD 155 per share, suggesting around a 20% upside. Xero's strategic marketing targets bookkeepers, accelerating customer acquisition. Although there are some concerns about growth in the UK and US, Xero's recent updates have been positive, making it a strong candidate for long-term investment.
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