Friday, August 15, 2014

Bubble of hot air has burst

Shares in the cloud accounting software company were down 6.28 per cent shortly after 1.30pm and trading at $20.15 each.

This is less than half the record price of $44.98 which Xero shares hit in March.

Nice one.  Another IT stock plummets earthward.  Nothing less than I'd expect of a company trying to soar above the poppy field.  IMHO built on clouds of hot air, appearing to be donkey deep in debt for years without making a profit.

I may be wrong, but the stock market has just clipped the wings of the would-be soaring eagle.

1 comment:

The Gantt Guy said...

PM, that's the whole point of the "market". It sets the price of the company. If you bought Xero at $5, you're still sitting on a pretty profit. If you were silly enough to buy the hype at $40, then more fool you!

Rod Drury has put together an excellent team and built an innovative company, producing a service which clearly has at least some demand. As with all entrepreneurs and innovators, he's staked his reputation and his fortune on the company (although I'd look for him to partly cash out and step down from the CEO role soon and look to start something new).

By all accounts, Xero has been built from nothing without government "assistance". It might be built on vapour and if so, will collapse sooner or later. But from what I've seen, it's a company which is contributing to the productive economy - unlike so many sucking from the taxpayer tittie - and on that basis, should be lauded rather than jeered.

NB: I am not associated with Xero in any way, and don't own any stock.