Is the sale of XERO FPO shares by management a cause for concern?

XERO FPO (ASX: XRO) announced today that its Chief Operating and Financial Officer, Sankar Narayan, has sold 30,000 Xero shares at current market prices (at an average of $29.45 per share).

The company said the purpose of the sale was to meet personal tax liabilities in relation to Xero shares granted to Mr Narayan as part of his remuneration package.

I like to own shares in companies where senior management hold a significant financial interest so as to align my long-term interests with theirs. As such, you might be wondering, is this a cause for concern?

My view is that there isn’t much to worry about for the following reasons:

  • Mr Narayan retains an interest in 42,874 Xero shares (which are valued at over $1.2m at current prices). In addition to this he has 46,902 Restricted Stock Units and 291,000 options. The CEO and founder Rod Drury also retains a significant stake in the business.
  • It’s not unusual for executives to sell off some shares to pay off their tax bills particularly when a large portion of their remuneration package was granted in shares.
  •  Xero’s long-term prospects have not changed in my view and the company is still growing quite phenomenally. Its H1 FY 18 results showed revenue was up 37% compared to H1 FY 17 and the lifetime value per subscriber had increased by 15%. As the company continues to reinvest its earnings in the business and expands overseas, I think it will get to break even sooner rather than later.

Overall, I don’t think there is any reason to panic and if I owned Xero shares I would hold them. I would also prefer to own shares in Xero compared to its rival Myob Group Ltd (ASX: MYO).

If you missed out on buying Xero shares and want to learn more about new technologies, click on the link below to get our free Artificial Intelligence report.

Don't Buy A SINGLE Stock Until You Read This

While conflict overseas is all media talking-heads seem to mention these days, the billionaire founder of Tesla is losing sleep over what he sees as a far bigger threat.

Elon Musk Warns: This has "vastly more risk than North Korea"

If you missed your opportunity to get in on Google, Microsoft, or Amazon in their early days, don't let it happen again. This emerging technology trend could offer a second chance for anyone who wishes they took part in these millionaire-maker stocks.

Click here to discover more!

Motley Fool contributor Kevin Gandiya has no position in any of the stocks mentioned.

You can follow Kevin on Twitter @KevinGandiya.

The Motley Fool Australia owns shares of Xero. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss a very important event! Chief Investment Advisor Scott Phillips and his team at Motley Fool Share Advisor are about to reveal their latest official stock recommendation. The premium “buy alert” will be unveiled to members and you can be among the first to act on the tip.

Don’t let this opportunity pass you by – this is your chance to get in early!

Simply enter your email now to find out how you can get instant access.

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our Financial Services Guide (FSG) for more information.