FMA closes Xero share investigation, concludes no insider trading
By Sophie Boot
Nov. 10 (BusinessDesk) - The Financial Markets Authority has closed its two-year investigation into trading in Xero
shares, concluding there was no insider trading ahead of a capital raising announcement.
The regulator began investigating in September 2015 after a referral by NZX in June that year. Despite no price
sensitive information being released to the market, shares in the software developer spiked in the lead-up to the Feb.
25 announcement that the firm had raised $147 million from North American investors.
The FMA wouldn't comment on the case while it was still investigating, but today said it had investigated three offshore
institutional investors referred to it by the NZX after unusually high volumes of the shares were traded and the price
rose sharply prior to the announcement.
The regulator quickly established trading by two of those hadn't been insider trading, but launched an investigation
into the third, which has now been concluded with no evidence of insider trading being found, it said.
All of the trading under investigation involved contracts for difference (CFDs), which are derivative products. Three
overseas financial regulators assisted the FMA in obtaining information about the trading parties, including tracing the
source of the buying through intermediaries, it said.
"Among other evidence, we reviewed research and due diligence carried out by this investor, on Xero, over a period of
months prior to the existence of non-public material information," the FMA said. "The FMA is satisfied that the extent
and timing of the party’s investment in Xero matched its investment strategy and did not indicate reliance on insider
information. Xero, its staff and directors were not implicated in the investigation."
Xero yesterday announced it will de-list from the NZX in favour of the Australian stock exchange. Its shares are down
2.4 percent to $32.61 today but have gained 91 percent this year.