Embattled edtech firm Byju’s rights issue to raise $200 million at a valuation cut of 99 percent has been fully subscribed, founder and CEO Byju Raveendran said in a shareholder letter.
Sources said that the company’s founder is set to put $45-$46 million in rights issue to preserve his shareholding in the company. According to people close to developments, some late stage investors who came in later rounds of funding are also keen to join the issue.
This comes ahead of an extraordinary general meeting later this week that a few of Byju’s largest investors have called, on February 23, in a bid to oust the company’s leadership and reconstitute its Board.
Sources said these ‘dissenting’ shareholders would be able to participate in the issue till February 29, or stand to have their stakes diluted massively.
“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. We have built this Company together and I want us all to participate in this renewed mission. Your initial investment laid the foundation for our journey and this rights issue will help preserve and build greater value for all shareholders,” founder and CEO Byju Raveendran told investors in a letter.
“I understand that participating in this rights issue may seem like a Hobson’s choice. However, this is the only viable option in front of us today to prevent permanent value erosion. I’m reminded of the words of Abraham Lincoln – “A house divided against itself cannot stand.” We must stand together and act in the best interest of the Company,” he added.
The edtech is dealing with the twin crises of a cash crunch and some of its investors seeking to oust the leadership to reconstitute the board.
In the letter, Raveendran committed to restructuring the Board and appointing two non-executive directors to the Board by the mutual consent of the founder and shareholders after the FY23 Audit, which is expected to close by the end of the quarter.
“To ensure transparency with regard to the usage of funds raised through the rights issue, we will appoint a third-party agency to monitor the same. This agency will report to all shareholders on a quarterly basis, within 45 days from the end of the quarter, along with commentary from the Board,” he added.
Raveendran believes that as the largest shareholder of the company, it would have been in his “best interest” to price this rights issue high.
“But that would not be in the best interest of the Company… I have personally put in $1.1 billion in the company over the last two years to pay salaries and maintain operations. I view this not as an obligation, but as my Dharma and duty. I have sacrificed everything to not fail in this duty,” he added.
FAQs about Byju’s Rights Issue and Leadership Crisis:
Funding:
- Is the $200 million rights issue fully subscribed? Yes, it has been fully subscribed.
- How much is Byju Raveendran investing? $45-$46 million to maintain his shareholding.
- Are dissenting investors participating? They have until February 29th to decide, otherwise their stakes will be diluted.
Leadership:
- Why is there an EGM on February 23rd? Dissenting investors are trying to oust the leadership and reconstitute the board.
- What is Byju Raveendran’s stance on board changes? He is committed to appointing two independent non-executive directors after the FY23 audit.
- Is he concerned about losing control? Yes, he acknowledges it would be in his personal best interest to have a higher valuation, but prioritizes the company’s interest.
Transparency:
- How will the use of funds be monitored? A third-party agency will report to shareholders quarterly.
- Why the low valuation compared to earlier rounds? This reflects the company’s financial struggles and is seen as the only option to avoid value erosion.
Additional:
- What are the twin crises Byju’s faces? Cash crunch and investor push for leadership change.
- What does Byju Raveendran say about his commitment? He emphasizes his personal sacrifices and commitment to the company’s success.
