Byju's is struggling to raise the full $200 million in a rights issue that its founders previously claimed was oversubscribed, sources familiar with the matter told TechCrunch, and now India's National Company Law Tribunal has stayed the company from proceeding with a second rights issue, citing allegations of shareholder oppression and mismanagement.
The court on Thursday ordered the company to maintain its existing shareholdings until a petition filed by investors General Atlantic and Sofina is disposed of.
Byju's first rights issue was held in late January, but a court ordered the company not to use the proceeds from the rights issue after many investors opposed the fundraise. The Bengaluru-based startup, which began raising funds after struggling to raise capital amid allegations of corporate governance lapses, saw its valuation fall to around $25 million, a staggering drop from the $22 billion price tag it once enjoyed.
The startup, busy recently trying to pay employees and stay afloat, had been trying to raise capital through a new stock offering, but those efforts have now stalled. Stock offerings allow companies to raise capital by giving shareholders the opportunity to buy additional shares at a discount based on the number of shares they currently own.
Thursday's court order is the latest episode in the spectacular collapse of Bijoux, once the world's most valuable education technology startup. The company is backed by some of the world's most influential investors, including BlackRock, Prosus, Peak XV, UBS, Bond, Sands Capital, Verlinvest, Tencent, Canada Pension Fund, Tiger Global and the World Bank's IFC.
Bijoux's fortunes had been declining for some time, along with post-pandemic tailwinds, but things started to seriously worsen last year when Prosus, PeakXV and the Chan Zuckerberg Initiative resigned from the company's board over issues with governance practices, and Deloitte removed the startup's account. Prosus said Bijoux was “not sufficiently evolved for a company of its size” and that the Indian company “ignored advice and recommendations from its backers.” Investors are also trying to remove Bijoux's founder and CEO, Biju Raveendran, from the company.
Some investors, including Prosus and Peak XV, also accused Bijoux of violating an earlier court order and allotting shares to some shareholders despite pending litigation. Bijoux was instructed to provide details of the allotment and to keep all the funds raised in a separate escrow account.
TechCrunch was unable to determine exactly how much Byju's ultimately raised in its initial rights offering, and a Byju's spokesperson did not respond to a request for comment.
“Our warrant shares have been fully subscribed and we remain grateful to our shareholders,” Raveendran wrote in a letter to shareholders in February, in which he urged alienated investors to give themselves another chance and participate in the warrant issue.
“But my measure of success is the participation of all our shareholders in the rights issue. We built this company together, and I want all of us to join us in this new mission. Your initial investment laid the foundation for our journey, and this rights issue will contribute to preserving and building even greater value for all shareholders.”
The court order came after BlackRock wrote off its investment in Bijoux and zeroed out the Indian company's valuation.