Byju’s, the Bengaluru-based edtech startup, reported that its $200 million rights issue has been fully subscribed. However, the company’s founder called upon major investors to participate in the rights issue amid an ongoing dispute between the startup and some of its largest shareholders.
The startup, which was valued at $22 billion in its last financing round in early 2022, announced last month that it was attempting to raise about $200 million through a rights issue. Byju’s reduced the pre-money valuation ask in the rights issue to about $20 million to $25 million, according to TechCrunch.
A group of investors, including Prosus and Peak XV, have not yet shown any interest in participating in the rights issue, according to a person familiar with the matter. If they don’t participate, they risk losing nearly all their equity stake in Byju’s.
Byju’s founder and CEO Byju Raveendran wrote in a letter to shareholders, “Our rights issue is fully subscribed and my gratitude to my shareholders remains strong. But my benchmark of success is the participation of all shareholders in the rights issue. Your initial investment laid the foundation for our journey and this rights issue will help preserve and build greater value for all shareholders.”
The Prosus-led group has called for an extraordinary general meeting in recent weeks to remove Raveendran and his family members from the edtech group. The investors don’t have the voting rights to enact any such change.
In the new letter to shareholders, Raveendran has sought to calm the situation with the investor group, pledging to appoint a third-party agency to monitor the fundraising in the rights issue, and restructuring the board by appointing two non-executive directors.
Byju’s has been seeking new funding for nearly a year. The startup was in the final stages of a $1 billion funding round last year, however, the talks derailed following the sudden quit of the auditor and three key board members. Byju’s ended up raising less than $150 million in debt from Davidson Kempner and made a technical default in a separate $1.2 billion term loan B.
Byju’s was preparing to go public in early 2022 through a SPAC deal that would have valued the company at up to $40 billion. However, as market conditions worsened, so too did the business outlook for Byju’s.
Some of Byju’s investors have recently aired concerns about the startup, questioning its business decisions and demanding improved governance.
Raveendran also highlighted some positive indicators, stating, “The traffic on our website and apps has shown remarkable growth in spite of reduced marketing spends in the recent past. This is a clear testament to the value our users find in our services and the faith they put in our content.
