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Byju's announces $200 million stock acquisition rights issue, reducing valuation by 99%

TechBrunchBy TechBrunchFebruary 21, 20244 Mins Read
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Byju's says its recently launched $200 million stock issue is fully booked, but amid a rift between the edtech group and some of its major shareholders, the company's founders He said he encouraged some of the major investors to participate.

The Bangalore-headquartered startup was valued at $22 billion in its last funding round in early 2022, and announced last month that it would seek to raise about $200 million through a rights issue. Byju's has lowered its pre-valuation on the rights issue from about $20 million to $25 million, he said, TechCrunch previously reported.

A group of investors including Prosus and Peak XV have not yet expressed interest in participating in the rights issue, the people said. If they do not participate in the rights issue, they risk losing nearly all of Byju's shares.

“Our rights issue has been fully subscribed and we remain grateful to our shareholders,” founder and CEO Biju Raveendran said in a letter to shareholders on Tuesday. “But my criterion for success is that all shareholders participate in the rights issue. We have built this company together, and I want all of us to be part of this new mission.” Your initial investment laid the foundation for our journey and this rights issue will help us preserve and build greater value for all shareholders.”

In recent weeks, the Prosus-led group has called for an extraordinary general meeting to remove Raveendran and his family from the edtech group. Byju's said in a statement earlier this month that investors do not have voting rights to enact such changes. The EGM is scheduled for this Friday.

In a new letter to shareholders, Raveendran sought to defuse the situation with the investor group. He said the start-up would appoint a third-party body to oversee fundraising in rights issues, and would work to restructure its board and appoint two non-executive directors.

“I understand that getting involved in this rights issue may seem like a Hobsonian choice. But this is what we have before us today to prevent the erosion of lasting values. It is the only viable option,” he wrote.

Byju's has been pursuing new funding for nearly a year. The company was in the final stages of raising about $1 billion last year, but negotiations with auditor Deloitte and three key board members (heads of Prosus, Peak XV and the Chan Zuckerberg Initiative) suddenly left the startup. failed. Instead, Byju's will raise his less than $150 million in debt from Davidson Kempner, and another after he committed a technical default on his $1.2 billion Term Loan B. I had to repay the entire amount promised to the house.

The events of the past eight months have been a major reversal of fortunes for Byju's, which has been mired in governance issues. Prosus said it spent more than $2.5 billion in 2021 and 2022 to acquire nearly a dozen startups.

Byju's was preparing to go public in early 2022 through a SPAC deal that would value the company at up to $40 billion. However, Russia's invasion of Ukraine in February caused the market to fall, forcing Byju's to put its IPO plans on hold, sources said. As market conditions deteriorated, so did Byju's business outlook.

Some Byju investors have publicly expressed concerns about the company in recent quarters, questioning some of its management decisions and demanding improved governance.

“Despite these headwinds facing us as a company, there are tangible indicators of our enduring brand strength and future potential,” Raveendran wrote in a letter to shareholders. mentioned in. “Despite recent reductions in marketing costs, our website and app traffic is showing impressive growth. This is because our users find value in our services and trust our content. Negative opinions are impacting brand perception, but consumer belief continues to grow.”



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