Xero Share Price Retraces on Convertible Note Announcement (ASX:XRO)

At time of writing the share price of Xero Ltd [ASX:XRO] trades at $128.47, down 5.44%.

The convertible note (a short-term debt that converts into equity) offering gives the company access to $700 Million US of new capital

Xero Share Price Chart 1

Source: Optuma

Xero looks to boost financial flexibility

2020 saw Xero gain enormous ground through the pandemic with the share price moving up 134.87% from the March low.

COVID-19 forced people to work from home, which saw more people turn to online software solutions to manage business payments.

The new convertible note will see a restructure of the previous note agreement and give the company access to $700 million USD.

The notes will mature on 2 December 2025.

Xero CEO Steve Vamos stated:

We’re pleased to be able to again make use of the convertible note structure to repurchase our existing notes and raise additional capital on favourable terms, and with the significant demand we’ve had for this upsized offer across our global investor base.

So, this is a way for Xero to get a bit more wiggle room.

Xero looking forward

Looking at the chart, the XRO share price was on an almighty run prior to today:

ASX XRO Share Price Chart 2

Source: Optuma

From the March low, the XRO share price moved up to the all-time high of $136.94 before falling back.

The move took place on declining volume indicating the buyers are not committed to going higher at this stage.

If the share price continues to fall in the short term, the levels of $125 and $118 may halt the fall.

Should the share price move higher the levels of $137 and $145 may come into focus.

After such a big rise in the share price, it may be due for a retracement in price soon.

It is also worth noting that XRO is trading at a P/E of more than 500.

Quite steep by anyone’s standards.


Carl Wittkopp

For Money Morning

PS: Discover three innovative Aussie fintech stocks with exciting growth potential. Download your free report now.

Carl Wittkopp writes for Money Morning and has a diploma in Financial Planning. He specialises in technical analysis.

Money Morning Australia