Byju’s is struggling to raise the full $200 million in its rights issue, which its founder previously claimed was oversubscribed, sources familiar with the matter told TechCrunch. And now India’s National Company Law Tribunal has stopped the company from going ahead with its second rights issue amid allegations of shareholder oppression and mismanagement.
On Thursday, the tribunal also ordered the company to maintain the establishment regarding its existing shares pending the consequence of a petition filed by two of its investors, General Atlantic and Sofina. Rights issues allow firms to raise capital by giving shareholders the opportunity to purchase additional shares at a discount in proportion to their current shareholding.
Byju’s conducted its first rights issue in late January, but a court order directed it not to use the funds raised through the rights issue after many investors opposed the fundraiser. The Bengaluru-based startup launched its fundraising after struggling to raise money amid allegations of corporate governance lapses, and a rights issue has significantly reduced its valuation to around $25 million, a staggering drop from the startup’s once expected price was $22 billion. enjoyed.
The startup recently tried to raise money again from one other rights issue in an attempt to pay employees and proceed operations, but those efforts are currently on hold.
Thursday’s court ruling is the latest episode in the spectacular fall of Byju’s, once the world’s most beneficial edtech startup. It is backed by some of the world’s most influential investors, including BlackRock, Prosus, Peak XV, UBS, Bond, Sands Capital, Verlinvest, Tencent, Canada Pension Plan, Tiger Global and the World Bank’s IFC.
Byju’s fortunes began to fade some time ago – as the post-pandemic headwinds pushed the company to the top – but things began to take a serious turn for the worse last yr when Prosus, Peak XV and the Chan Zuckerberg Initiative resigned from the company’s board, citing problems with its operations management practices, and Deloitte deleted the startup’s account. Prosus said Byju’s “has not developed sufficiently for a company of its scale” and that the Indian company “disregarded the advice and recommendations” of its supporters. Investors sought to oust founder and CEO Byju Raveendran from the company.
Some investors, including Prosus and Peak XV, also accused Byju’s of violating an earlier court order and allocating shares to some shareholders despite the ongoing case. Byju’s has been directed to submit allocation details and keep all funds collected in a separate trust account.
TechCrunch was unable to determine exactly how much Byju raised in its initial rights issue. Byju’s spokesman didn’t respond to a request for comment.
“Our rights issue has been fully subscribed and my gratitude to my shareholders remains strong,” Raveendran wrote in a letter to shareholders in February. In the letter, he urged estranged investors to give him one other probability and participate in the rights issue.
“But my determinant of success is the participation of all shareholders in the rights issue. We built this company together, and I want all of us to be a part of this renewed mission. Your initial investment laid the foundation for our journey, and the rights issue will help preserve and build greater value for all shareholders.”
The court’s order got here after BlackRock wrote off its investment in Byju’s, giving the Indian company an implicit valuation of zero.