BYJU'S raises $200M through rights issue at 99% valuation cut
What's the story
BYJU'S , the embattled edtech company, has managed to raise $200 million through a fully subscribed rights issue at a 99% valuation cut, as reported in a shareholder letter written by founder and CEO Byju Raveendran. Raveendran plans to invest $45-$46 million in the rights issue to maintain his shareholding in the company, while some late-stage investors are also eager to participate. A rights issue is an offer to existing shareholders to purchase more shares in the company.
Ouster fears
Extraordinary General Meeting called by largest investors to oust leadership
A group of BYJU'S largest investors has scheduled an extraordinary general meeting (EGM) for February 23, with the goal of removing the company's leadership and reorganizing its board. Shareholders who disagree have until February 29 to join the issue or face significant dilution of their stakes. Raveendran thanked shareholders and encouraged them to take part in the rights issue, saying, "We have built this company together and I want us all to participate in this renewed mission."
Counter-measures
Raveendran commits to board restructuring
In his letter, Raveendran pledged to restructure the board and appoint two non-executive directors by mutual agreement between the founder and shareholders after the FY23 audit, which is anticipated to conclude by the end of the quarter. To guarantee transparency in the use of funds raised through the rights issue, a third-party agency will be hired to oversee and report to all shareholders on a quarterly basis, accompanied by commentary from the board.
Founder's appeal
Raveendran's personal investments and duties
Raveendran stated that as the largest shareholder, it would have been in his "best interest" to set a high price for the rights issue but chose not to for the company's benefit. He disclosed that he personally invested $1.1 billion in BYJU'S over the past two years for salaries and operations, considering it his "dharma and duty." He quoted Abraham Lincoln, saying, "A house divided against itself cannot stand," and called for unity in the best interest of the company.