Xro - xero

[blackcap]

...but only by taking on some currency risk that you might not want to take on.

How do you take on currency risk? I am not sure if that is valid. You buy XRO the company whether it is listed on the NZX or the ASX and ultimately its value will be what it is. IF the AUD tanks, then if the company is still worth what it is worth in NZD, then the stock price should jump and vice versa. I sometimes wonder if people overthink currency risk when investing offshore, or worry about it more than they need to.

[The BOWMAN]

XRO is a global company that receives majority of income not in NZD. Currency exchange rates will play a role on their financial result. But not because if its shares are traded in AUD or NZD.

Blackcap is absolutely correct.

[Oliver Mander]

XRO is a global company that receives majority of income not in NZD. Currency exchange rates will play a role on their financial result. But not because if its shares are traded in AUD or NZD.

Blackcap is absolutely correct.

I don't agree.

XRO will have currency management mechanisms in place - be it hedging or otherwise. They're in a better position than I am (as an individual) to optimise currency flows for NZD, be it through hedging, natural cost/revenue matching in same currency or cash swaps.

In short, they have access to mechanisms to manage the certainty of cashflows in NZD, that I cannot do.
As an ASX company, were I an investor, I need to manage my own currency conversion risk between NZ and AU. So I am now exposed to the risk as an individual, rather than "outsourcing" that to the company.

Essentially, you're exposed to a situation where XRO's enterprise value does not change, but you're exposed to another layer of risk because of translation between AUD and NZD.

[The BOWMAN]

I don't agree.

XRO will have currency management mechanisms in place - be it hedging or otherwise. They're in a better position than I am (as an individual) to optimise currency flows for NZD, be it through hedging, natural cost/revenue matching in same currency or cash swaps.

In short, they have access to mechanisms to manage the certainty of cashflows in NZD, that I cannot do.
As an ASX company, were I an investor, I need to manage my own currency conversion risk between NZ and AU. So I am now exposed to the risk as an individual, rather than "outsourcing" that to the company.

Essentially, you're exposed to a situation where XRO's enterprise value does not change, but you're exposed to another layer of risk because of translation between AUD and NZD.

You might be over thinking it. In essence, it is no different to investing in ASX XRO shares instead of NZX ones today. Investing in ASX XRO shares does not give you either exchange rate advantage or disadvantage from value perspective. Ignoring the small loss if you need to convert the currency for every trade.

[Oliver Mander]

You might be over thinking it. In essence, it is no different to investing in ASX XRO shares instead of NZX ones today. Investing in ASX XRO shares does not give you either exchange rate advantage or disadvantage from value perspective. Ignoring the small loss if you need to convert the currency for every trade.

You're assuming its a small loss, caused only by the transaction fees.
If the NZD moves violently against the AUD, that's a new risk (compared to investing in XRO directly).

If XRO's revenue streams were mostly based in New Zealand, I'd agree with you, as the enterprise value is determined by NZ$. But the fact that its so diverse means that the NZ$ / AU$ cross rate can move apart and have no impact whatsoever on XRO's enterprise value - and hurt or benefit NZ$ shareholders depending on the exchange rate movement.

definitely not overthinking it. Currency risk 101.

FWIW, I think the change in listing is a poor decision, and the reasons given by Mr Drury were the largest load of rotten milk that this pussycat has had to swallow for some time.
We shall see, though...its their call and they must have their reasons.

[The BOWMAN]

You're assuming its a small loss, caused only by the transaction fees.
If the NZD moves violently against the AUD, that's a new risk (compared to investing in XRO directly).

If XRO's revenue streams were mostly based in New Zealand, I'd agree with you, as the enterprise value is determined by NZ$. But the fact that its so diverse means that the NZ$ / AU$ cross rate can move apart and have no impact whatsoever on XRO's enterprise value - and hurt or benefit NZ$ shareholders depending on the exchange rate movement.

definitely not overthinking it. Currency risk 101.

FWIW, I think the change in listing is a poor decision, and the reasons given by Mr Drury were the largest load of rotten milk that this pussycat has had to swallow for some time.
We shall see, though...its their call and they must have their reasons.

um... we can both hold our own views.

On the decision itself, eventually I think Xero needs to get on NASDAQ to raise its profile globally. It is good to have large volume traded through this dip. Not good to have a lot of people with large profit on paper. Always need shakeups like this to wash some of them out.

[blackcap]

).

If XRO's revenue streams were mostly based in New Zealand, I'd agree with you, as the enterprise value is determined by NZ$. But the fact that its so diverse means that the NZ$ / AU$ cross rate can move apart and have no impact whatsoever on XRO's enterprise value - and hurt or benefit NZ$ shareholders depending on the exchange rate movement.



FWIW, I think the change in listing is a poor decision, and the reasons given by Mr Drury were the largest load of rotten milk that this pussycat has had to swallow for some time.
We shall see, though...its their call and they must have their reasons.

Ignoring transaction costs as they are tiny. Whether XRO is trading on the ASX or the NZX will make no difference to the value of XRO in NZD. whatever the exchange rate is there will be a NZD value assigned to XRO. IF the AUD were to plummet violently, then the XRO share price would commensurately rise violently to reflect this new paradigm. So I see no currency risk whatsoever. Just like now, the ASX price of XRO will reflect what it is worth in NZD (the nzx traded XRO price) divided or multiplied by the currency factor.

Agree with your second point that the change in listing is poor and not necessary. But the NZX has not been friendly to issuers for a while now. From what I can glean it is a very bureaucratic organisation that does not really engender support.

[Ace]

You might be over thinking it. In essence, it is no different to investing in ASX XRO shares instead of NZX ones today. Investing in ASX XRO shares does not give you either exchange rate advantage or disadvantage from value perspective. Ignoring the small loss if you need to convert the currency for every trade.

If you purchase shares in another exchange/currency compared to your home currency you WILL expose yourself to currency or exchange risk.

[The BOWMAN]

If you purchase shares in another exchange/currency compared to your home currency you WILL expose yourself to currency or exchange risk.

Interesting so many investors don't understand in this case, it doesn't matter at all as far as the XRO shares are concerned. No wonder the knee jerk reaction.

[RGR367]

http://www.nzherald.co.nz/business/n...ectid=11942805

And on this, Brian Gaynor said: "Two of its biggest problems are the huge amount of off-market trading and the dominance of one broker. The NZX needs to address these issues immediately if it wishes to boost the integrity and long-term viability of the New Zealand sharemarket" but did not identify the broker. Would anyone know who that broker be?

FYI and answering my above question and as per NBR pay walled article yesterday, that broker is First New Zealand Capital (FNZC).