On Monday, Xero shares came under pressure after CEO Sukhinder Singh Cassidy sold her remaining shares on-market for ~$2.2 million at $74 per share, leaving her (currently) with no directly held ordinary shares. The company said the disposal was undertaken to manage personal tax obligations, and Cassidy continues to hold a substantial economic interest through 171,381 restricted stock units (RSUs) and more than 1.0 million unlisted options. However, the sale caught our eye because it follows $5.4 million of share sales between late May and early June.
The timing is especially sensitive, with Xero’s shares down sharply over the past year and the board simultaneously seeking investor support for a revised remuneration package after the collapse in the value of Cassidy’s performance options, which have an exercise price of $171.11— in other words, she struck an ill-timed deal and wants to move the goalposts.
Operationally, Xero has performed reasonably well under Cassidy’s stewardship. However, the US$2.5 billion acquisition of Melio last year was completed near the peak of the software market and has since proved costly, with software valuations globally being heavily de-rated amid concerns about AI disruption and future growth.
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XRO shares fell 4.3% following news of the sale, marking another difficult session for shareholders, MM included. We have mixed feelings about the reported proposal to reset Cassidy’s remuneration so it is less dependent on the struggling share price.
On one hand, shareholders have suffered a significant decline and Cassidy willingly accepted a remuneration structure tied to Xero’s equity performance. It is therefore reasonable to argue that she should share in the downside rather than have the terms rewritten after the fact.
On the other hand, retention matters. The market for experienced technology executives of Cassidy’s calibre is competitive, and her departure would likely be viewed negatively by investors. Any incoming CEO would also negotiate a new package based on the current share price, almost certainly receiving more achievable incentives than those attached to the previous peak.
MM remains patiently long XRO
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