Xero’s A$1.85bn Capital Raise Fuels Ambitious US Expansion Amid Integration Risks

Capital Raise to Fuel Strategic Acquisition

Xero Limited has successfully completed a fully underwritten institutional placement raising A$1.85 billion, a move designed to finance its acquisition of Melio Limited, a fast-growing US payments and cash flow management platform. The placement involved issuing approximately 10.5 million new shares at A$176 each, attracting strong support from both existing and new institutional investors.

This capital injection marks a pivotal step in Xero’s strategy to expand its footprint in the lucrative US market, leveraging Melio’s established presence and technology to enhance its accounting and payments offerings. The acquisition is expected to complement Xero’s existing platform, which integrates accounting, payroll, and payments to serve millions of small businesses globally.

Share Purchase Plan Opens Door for Retail Investors

Alongside the institutional placement, Xero has announced a non-underwritten Share Purchase Plan (SPP) targeting approximately A$200 million. This initiative allows eligible retail shareholders in Australia and New Zealand to participate by purchasing new shares at a price set at the lower of the placement price or a 2% discount to the five-day volume weighted average price. The SPP is designed to provide retail investors with a pro rata opportunity to invest, with a maximum application size capped at A$30,000 per shareholder.

The funds raised through the SPP will be allocated for general corporate and working capital purposes, providing Xero with additional financial flexibility as it integrates Melio’s operations and pursues its growth objectives.

Melio’s Growth and Strategic Fit

Founded in 2018 and headquartered in New York, Melio has rapidly scaled to serve over 80,000 customers, generating US$153 million in revenue for the fiscal year ending March 2025. Its platform offers accounts payable, receivable, and cash flow management solutions, integrating with major financial institutions and partners such as Capital One, Shopify, and Fiserv. This extensive network positions Melio as a valuable asset for Xero, enabling access to millions of small businesses through embedded payment products.

Xero’s CEO, Sukhinder Singh Cassidy, highlighted the acquisition as a transformative opportunity, emphasizing the combined potential of Xero and Melio to deliver a market-leading accounting and payments platform. The deal aligns with Xero’s 3x3 strategy, which focuses on expanding its core offerings across three key markets, with the US being a critical growth area.

Market and Regulatory Considerations

The new shares issued under the placement will rank equally with existing shares, with settlement expected by 30 June 2025 and trading commencing on 1 July 2025. The announcement also underscores regulatory compliance, noting that the shares are not registered for sale in the United States and are offered only in offshore transactions to avoid US securities law complications.

While the capital raise and acquisition have been well received, forward-looking statements caution investors about inherent risks and uncertainties, including integration challenges and broader geopolitical tensions that could impact market conditions.