Byju’s says that its newly launched $200 million rights issue has been fully subscribed. However, the founder of the startup asked some of its biggest investors to take part, even though there is a disagreement between the edtech group and some of its biggest shareholders.
The Bengaluru-based startup was valued at $22 billion in its most recent round of funding in early 2022. Last month, it said it would be trying to raise about $200 million through a rights issue. TechCrunch says that Byju’s lowered the pre-money value ask in the rights issue to between $20 million and $25 million.
Someone who knows about the situation says that a group of investors, including Prosus and Peak XV, have not yet shown any interest in taking part in the rights issue. They could lose almost all of their equity stake in Byju’s if they don’t vote in favor of the rights question.
“Our rights issue has been fully subscribed, and my gratitude to my shareholders remains strong,” founder and CEO Byju Raveendran wrote in a letter to shareholders on Tuesday. “But for me, success means that all of my shareholders voted in favor of the rights issue.” We built this business together, and I want us all to be a part of this new purpose. Your initial investment set us on the path we’re on now, and this rights issue will help all owners keep and grow their value.
In the past few weeks, the group lead by Prosus has called for an extraordinary general meeting to kick Raveendran and his family out of the edtech group. The investors don’t have the power to make that kind of change, Byju’s said in a statement earlier this month. This Friday is the day of the EGM.
Raveendran tried to make things better with the investor group in his new letter to owners. He said that the startup would hire a third-party agency to keep an eye on the fundraising for the rights problem and that they were going to change the board and add two non-executive directors.
“I know that taking part in this rights problem might seem like a tough choice. “However, this is the only real choice we have right now to stop permanent value loss,” he wrote.
For almost a year, Byju’s has been looking for new money. A year ago, the startup was almost done with its plans to raise about $1 billion. However, the talks fell through when Deloitte, the auditor, and three key board members (representing Prosus, Peak XV, and the Chan Zuckerberg Initiative) suddenly quit. Davidson Kempner gave Byju’s less than $150 million in debt, and the company had to return the investor the full amount because it technically defaulted on a separate $1.2 billion term loan B.
The last eight months have been a big turn around for Byju’s, which has been having a lot of problems with its management. Prosus says the startup bought almost a dozen other startups for more than $2.5 billion in 2021 and 2022.
Byju’s was getting ready to go public in early 2022 through a SPAC deal that could have made the company worth as much as $40 billion. A person familiar with the situation says that Byju’s had to delay its IPO plans because of Russia’s invasion of Ukraine in February, which went down in the stock market. As things got worse in the market, so did Byju’s business prospects.
In recent months, some of Byju’s investors have spoken out about their worries about the startup, calling into question some of its business decisions and calling for better control.
Also Read: Byju’s Valuation Its Value Ask by 99% in a Rights Issue Because It Needs Cash Quickly
“Even though our company is facing these challenges, there are clear signs of our strong brand and future potential,” Raveendran wrote to the shareholders. The number of people visiting our website and apps has grown incredibly, even though we have recently spent less on marketing them. It’s clear that our users trust our material and services because of this. The bad press has changed how people see the brand, but buyer faith in it keeps growing.
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