Edtech Giant Grapples with Cash Crunch and Investor Pressure to Overhaul Leadership and Board.
“Byju’s Rights Issue Fully Subscribed Despite 99% Valuation Cut; Founder to Invest $45-$46 Million to Preserve Shareholding”
In a shareholder letter, Byju’s founder and CEO, Byju Raveendran, announced the successful subscription of the edtech firm’s rights issue, which aims to raise $200 million at a valuation cut of 99 percent. Raveendran emphasized his gratitude to shareholders and expressed his desire for all stakeholders to participate in the renewed mission.
Sources revealed that Raveendran is set to inject $45-$46 million into the rights issue to maintain his ownership stake in the company. Additionally, late-stage investors from later funding rounds have shown interest in participating in the issue.
The rights issue’s success comes amidst looming challenges for Byju’s, including an extraordinary general meeting scheduled for February 23. Some of Byju’s largest investors have called for this meeting with the aim of ousting the company’s leadership and reshaping its board.
Dissenting shareholders, who are pushing for leadership changes, have until February 29 to participate in the rights issue or risk significant dilution of their stakes.
Raveendran reiterated his commitment to ensuring all shareholders’ participation in the rights issue, emphasizing that the collective efforts of investors have been instrumental in the company’s journey. He views the rights issue as a means to preserve and enhance overall shareholder value.
“In light of the current challenges facing our company, I recognize that participating in this rights issue may appear to be a Hobson’s choice. However, it is the only viable option available to us today to prevent permanent value erosion. As Abraham Lincoln famously said, ‘A house divided against itself cannot stand.’ We must unite and act in the best interest of the Company,” he added.
Byju’s is grappling with the dual crises of a cash crunch and pressure from some investors to remove the leadership and overhaul the board.
In the letter, Raveendran pledged to restructure the Board and appoint two non-executive directors by mutual agreement between the founder and shareholders after the completion of the FY23 Audit, expected by the end of the quarter.
“To ensure transparency regarding the utilization of funds raised through the rights issue, we will engage a third-party agency to oversee the process. This agency will provide quarterly reports to all shareholders within 45 days of each quarter’s end, along with commentary from the Board,” he added.
Raveendran emphasized that, as the largest shareholder, it would have been in his personal interest to set a high price for this rights issue.
“But that would not serve the best interests of the Company… Over the past two years, I have personally invested $1.1 billion in the company to cover salaries and sustain operations. I consider this not as an obligation, but as my Dharma and duty. I have made sacrifices to fulfill this duty and ensure the company’s success,” he added.