There aren’t many ASX investors who haven’t heard about Xero Limited (ASX: XRO) shares in recent years. Despite a tough time last week, shares in the Kiwi cloud accounting software group have climbed more than 50% in the past 12 months and more than 700% in the past 5 years.
Many investors want to know what’s going on with the insiders of large ASX companies. Xero is no exception — so what are insiders doing with their Xero shares right now?
Why does it matter?
To understand why insider buying and share ownership matters, it’s important to think about how these public companies work.
The CEO is appointed by the board of directors to run the day-to-day operations of the company. The board, in turn, is appointed by the shareholders to represent their interests.
In theory, it’s a good sign when insiders like the CEO and company directors buy more shares. After all, they have a great understanding of the company and should have their interests aligned with shareholders.
In other words, an insider buying could mean Xero shares are underpriced or the future prospects of the company are strong. Naturally, one would think people invest because they think what they’re buying will go up in value.
The opposite is also true. If insiders are selling, it can be a sign that something bad is on the horizon or that insiders believe the shares are overpriced. This is one reason why the market often has an adverse reaction to insiders selling large parcels of their own shares.
Are insiders buying or selling Xero shares?
The best way to see what’s happening with Xero is to look at recent director transactions.
Founder Rod Drury sold $300 million worth of Xero shares on 24 August 2021. Drury’s family trust sold 2 million shares at $150 per share in an off-market trade. That didn’t seem to phase shareholders given August was actually a great month for the company’s share price.
Previously, non-executive chairman David Thodey and non-executive director Mark Cross both purchased shares on 17 May 2021. Thodey and Cross bought about $210,000 and $180,000 worth of Xero shares respectively.
Xero’s shareholder base remains widely dispersed. HSBC Custody Nominees (Australia) Limited (34.0%), JP Morgan Nominees Australia Limited (20.3%) and Mr Drury’s associated entities (8.1%) make up the majority of share ownership. Rival accounting software company, MYOB, co-founder and non-executive director Craig Winkler’s company Givia Pty Ltd owns a 4.5% stake in the Kiwi company.
It’s hard to gain much insight on insider buying and selling of Xero shares in recent months. That’s because there are limited transactions and the company remains relatively tightly held.
While Founder Rod Drury has made a couple of bumper block trades in recent years, shares remain widely held in the Aussie WAAAX share.