Byju’s, the Bengaluru-based edtech startup, announces that its newly launched $200 million rights issue was completely subscribed. The founder, Byju Raveendran, had urged major investors to participate in the face of discord with some of the company’s biggest shareholders. Valued at $22 billion in its preceding financing round in early 2022, Byju’s reported last month that it planned to raise approximately $200 million through a rights issue.
A steep cut was made to the premoney valuation in the rights issue, bringing it down to an estimated $20 million to $25 million. It’s noteworthy that key investors like Prosus and Peak XV have not shown any interest in participating in the rights issue. Their non-participation risks almost depleting their equity stake in Byju’s.
In a recently-penned letter to shareholders, Raveendran showed gratitude to the shareholders and emphasized the importance of each one’s participation in the rights issue. He also made mention of the company’s forethought to appoint a third-party agency to ensure transparency in the funding process.
Attention was also drawn to the recent call for an extraordinary general meeting by a Prosus-led investor group, with an intent to overthrow Raveendran and his family from the edtech group. However, this move was impermissible as the investors lacked the necessary voting rights.
Over the past year, Byju’s has pursued new funding. Negotiations to raise about $1 billion were in the final phases in 2021, but these derailed after Deloitte, the auditor, and Prosus, Peak XV, and the Chan Zuckerberg Initiative’s board member representatives resigned abruptly. Instead, Byju’s raised slightly under $150 million in debt from Davidson Kempner, only to repay the investor in full after technical default on a separate $1.2 billion term loan B.
This represents an unfortunate turn of events for Byju’s, leading to governing issues in a company that has spent about $2.5 billion to acquire several startups in 2021 and 2022. Additionally, escalating market situations and Russia’s invasion of Ukraine have resulted in Byju’s having to pause its IPO plans, which would have elevated the company’s value to a high of $40 billion.
Yet, Raveendran ensures shareholders of the company’s sustained brand strength and future potential. Despite a skewed perception due to negativity, traffic growth on Byju’s platforms is indicative of the company’s growth and the value derived by the users from its services.
Source: Byju’s says $200 million rights issue that cuts valuation by 99% fully subscribed.
