Byju’s, the Bengaluru-based edtech startup, has announced that its $200 million rights issue has been fully subscribed. However, the company’s founder, Byju Raveendran, has urged major investors to participate in the rights issue amid a growing conflict between the startup and some of its largest shareholders.
Key Takeaway
Byju’s $200 million rights issue has been fully subscribed, but major investors, including Prosus and Peak XV, have yet to participate, risking the loss of their equity stake in the edtech startup.
Valuation and Participation
Byju’s, which was valued at $22 billion in its last financing round, reduced the pre-money valuation in the rights issue to approximately $20 million to $25 million. Despite this significant cut, the rights issue has been fully subscribed. However, some major investors, including Prosus and Peak XV, have not yet shown interest in participating, risking the loss of a significant portion of their equity stake in Byju’s.
Founder’s Appeal
In a letter to shareholders, Byju Raveendran expressed his gratitude for the full subscription of the rights issue but emphasized the importance of all shareholders’ participation. He stressed the need for collective involvement in the renewed mission, highlighting the foundational role of the initial investments and the potential for building greater value for all shareholders through the rights issue.
Resolution Efforts
Amid the rift with the investor group, Byju’s founder has proposed measures to address the situation. These include appointing a third-party agency to monitor the fundraising, committing to board restructuring, and the appointment of two non-executive directors. Raveendran acknowledged the challenging decision for investors but emphasized the necessity of the rights issue to prevent permanent value erosion.
Challenges and Reversals
Byju’s has faced challenges in securing new funding, with previous attempts derailed after governance issues and the abrupt departure of key board members. The startup’s plans for a SPAC deal and IPO were also affected by market conditions and geopolitical events, leading to a significant reversal of fortunes.
Brand Strength and Future Potential
Despite the challenges, Raveendran highlighted the enduring brand strength and future potential of Byju’s, citing remarkable growth in website and app traffic as indicators of user faith in the company’s services and content.
