Not content with trolling over the Hager book, Kim Dotcom decided to pick another fight with business icon Rod Drury, baiting him over Xero's [NZX: XRO] share price.
Get off the grass, Kim.
The political party Dotcom founded is campaigning for cheaper and better broadband connectivity, domestically and internationally. Drury has pushed hard on both those issues. So you'd think he'd be someone Dotcom would respect.
Not for a minute. Drury's crime is that, when prodded for his opinion of Dotcom by an interviewer on TVNZ's Q+A, he replied:
"I thought Kim at the beginning was you know, it was really cool to see somebody like that come through, but his manipulation of the media, he's very media savvy, understands that it's a good story, that journalism's cheap," Mr Drury said.
"Kim doesn’t represent the Internet generation. I represent the Internet generation. We've created 800 new jobs, we're paying lots of PAYE. We're investing, we're burning, we're creating export revenue. So I just think it's a sideshow and wish it would just go away."
True that. Xero has created a lot of high quality jobs, most of them in NZ, and many more through its software and service partners. The province of Dotcom's Megaupload fortune is being questioned by criminal and civil actions, and his latest start-ups, Mega an Baboom, are having issues. Mega's controversial reverse listing has been delayed twice, and there's constant mystery around its investors. Baboom is constantly extending its capital-raising deadline. Dotcom did create some software development jobs around Baboom, but he offshored them to Portugal.
Dotcom responded to Drury's Q+A comments by tweeting that Xero shares were overvalued.
Not one to let a feud lie, the Internet Party and Mega founder brought the issue up again last night, tweeting:
@kimdotcom we make life better for 330,000+ small businesses across 150 countries, created 900 new jobs just hit 100m ARR. I sleep well— Rod Drury (@roddrury) August 14, 2014
To which Kim replied:
$6.25! That'll learn 'em! the Xero founder will just ignore him from this point.
Xero shares [NZX:XRO] have pulled back this year, but the decline is pegged to questions over the company's market cap, and the heady valuations of software-as-a-service companies worldwide.
The real reason for this week's pullback
Across the ditch, Macquarie has just initiated coverage of Xero with an “underperform” rating, using a familiar line: “beautiful company, expensive stock”.
“We expect Xero to gain significant market share of the small business accounting software market. They have a compelling product and have gained a good market share in the countries they entered first. However, the current share price is factoring in too much upside,” Macquarie analyst Daniel Frost said.
Only one of the five analysts officially covering Xero, First NZ Capital's James Schofield, has the equivalent of a buy rating.
The debate about whether Xero's valuation got a bit over-heated will continue, especially given the challenge posed by giant incumbent Intuit in the US. But there's a broad consensus it will succeed as a company long term.
As for Dotcom's skills as a stock picker: in November 2012, in a pique over the latest installment of company's flagship game, Call of Duty, he predicted Activision shares would fall. At the time, they were trading around $US11. By February 2013, they were up 23%. Today, Activision closed at $US23.31.
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