Shareholder vote on Xero delisting a waste of time
ANALYSIS: Embarrassment the only result, says Tom Pullar-Strecker.
Xero has caused a ruckus in the financial community by announcing it will delist its shares from the New Zealand stock exchange at the end of January.
There appears to be no turning back on the decision, now the NZX has brushed off an appeal by Auckland fund manager Milford Asset Management, which had asked the NZX to force Xero to hold a shareholder vote.
What does delisting mean?
Xero’s shares will no longer be quoted on the NZX. Instead, they will only trade on the Australian stock exchange. At the moment, they trade on both exchanges.
Will this make it harder for Kiwis to buy and sell Xero shares?
No, but it will make it a bit more costly. Kiwis’ shareholdings will be automatically transferred to the Australian registry.
Kiwi stockbrokers all let clients buy and sell shares on the ASX and the fees are usually no different to trading shares on the NZX.
But New Zealand shareholders will have to convert money from Australian dollars into New Zealand dollars if they sell their holdings and repatriate the proceeds, or exchange money to Australian dollars to buy shares.
So they will lose out from those foreign exchange fees.
Why was Milford upset?
It owns $10 million of Xero shares in a $293m ‘‘passive’’ fund that tracks the NZX 50. Given the mandate of that fund, it will probably now have to sell that holding, and it blames delisting for a 7 per cent decline in Xero’s share price.
Who else loses from delisting?
New Zealand brokers, who will lose millions of dollars in fees trading shares on the NZX, and the NZX itself which will lose the fees it earns from Xero’s listing and which may find it harder to attract new listings following the loss of the star stock.
There could be a small flow-effect through the entire financial ecosystem. Local analysts will face less demand for their research, arguably it even eats away at the business for regulatory bodies like the Financial Markets Authority.
Could the NZX have forced Xero to put delisting to a shareholder vote?
The NZX says it could have done, and it certainly appears to have considered doing so, but it decided not to require a vote, given the rights of Xero shareholders will be ‘‘substantially unchanged’’.
Xero says any vote could not have been binding on the company anyway, as it is only the listing that is changing, not the country in which it will be resident, which remains New Zealand.
The bottom line is that Xero would almost certainly have won any vote anyway as only 30 per cent of its shares are held by New Zealanders, and more than 40 per cent of those shares are owned by chief executive Rod Drury.
Shareholder votes rarely go against the board’s wishes, so a vote would probably at most have only caused some embarrassment – arguably both for Xero and the NZX .