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Bill Bennett


NZ Herald’s steampunk view of Xero

Read the headline on Hamish Fletcher‘s High-flyer Xero crashes to worst spot and you might think the accounting software as a service company is in trouble.

Technically speaking Fletcher is right. Xero shares lost 50 percent of their value during 2014. They fell 65 percent from their highest point. In that sense it does make the company the worst performer in the NZX.

But investors overpriced Xero shares at their peak and, presumably, at the start of 2014.

The Herald might have added that anyone buying Xero shares at the start of 2013 would have made more than 100 percent on their investment when 2015 began. Or getting on for 600 percent from the start of 2012.

Traditional rules

If Xero was a traditional industrial stock, say a company from the steampunk era or the more dieselpunk Air New Zealand, it would be bad news indeed.

Xero is a technology company. It’s still young. It is a growth stock. Xero’s price moves around a lot. Some speculators took a wild punt on the company and came off badly. That’s what the numbers tell us.

The Herald tries hard to make its stock market reporting relevant to non-specialist readers. I applaud the idea. The practice is something else.

Creating tables, which look like sporting leagues, makes financial news accessible. But January 1, 2014 and January 1, 2015 are arbitrary dates. Pick two other dates one year apart and you would get a quite different picture.

And that’s the inherent problem in popular reporting of financial markets. The simple-to-understand snapshots thrown out by this kind of table, or for that matter the quick daily run through gainers and decliners on electronic news bulletins don’t convey useful information for anyone.

Professional investors don’t sit at their trading desks waiting for the whiz through prices on Radio NZ’s Midday Report. The rest of us don’t hear the report tell us Air New Zealand is down 10 cents then decide it’s time to call the broker.


Fletcher puts the Xero facts in context. He notes: “chief executive Rod Drury’s focus on customer growth means this is unlikely to faze him.”

This isn’t hidden. These words are in the third paragraph, above the fold as we used to say in the old time newspaper world.

Yet I’m willing to bet if the headline on the story ever gets dragged out and used in public, say by Xero’s rivals in the US, that extra, clarifying third par information won’t be part of the picture.

There are stories about Xero’s share price movements that need writing. Thanks to collapsing advertising revenue, the Herald no longer has the resources to allow a journalist like Hamish Fletcher spend a couple of days getting to the bottom of the stock’s rise and fall. That’s not just a problem for the Herald, it’s a problem for Xero, for investors and for the New Zealand public. My plan for 2015 is to do something about that. Watch this space.



One thought on “NZ Herald’s steampunk view of Xero

  1. There is a difference between investing in a company and speculating on a stock.
    Investors will have some faith in the product and the people who are managing the company.
    Speculators don’t care. They are only interested in buying low and selling high.
    The way I see it Xero has a good product, I use it. Rod Drury has a proven track record of growing businesses. That’s where it begins and ends. Everything else is arbitrary. The trend is your friend – but you have to decide whether the trend that interests you is whether Xero hits its operational targets or whether you want to take a punt on making a quick profit. As you rightly point out Xero is a tech company and the cost of scaling its business isn’t as burdened by increasing plant and equipment to meet demand, so a dip in stock price shouldn’t affect growth dramatically – if at all. I get the impression they don’t waste capital on ‘Superbowl ads’, so steady as she goes is probably a good strategy. Of course we’re talking about a relatively lean vessel and not the Titanic. I guess a low stock price only makes them vulnerable to acquisition or some kind of nutty shareholder revolt driven by avarice, rather than good sense, something along the lines of Mr Icahn.

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