Byju’s Raveendran offers renounced shares amid latest attempts to save firm

Byju’s founder Byju Raveendran seems to be making a final dash at getting things back in some sort of order at his edtech firm, most notably in finding ways to amenably work with a large group of dissenting investors. The company held an EGM on Friday, aimed to gain approval for a crucial rights issue of $200 million, a move necessitated by the company’s financial struggles amidst a very public falling out with some of its biggest investors.

One noteworthy fact about the EGM was the absence of several high-profile investors, including Peak XV Partners, General Atlantic, Chan-Zuckerberg Initiative, and Prosus. These investors had, at an earlier point, expressed concerns regarding governance and strategic decisions within the company. The EGM proceeded with approximately twenty investor representatives in attendance, along with management from Think & Learn, the parent company of Byju’s. Reports indicate that the meeting progressed without any objections being raised, and centered around increasing the authorized share capital to facilitate the $200 million rights issue.

At the meeting, Byju Raveendran (founder of the edtech major) struck a conciliatory tone in a letter addressed to shareholders. He claimed to have received over 50% of the votes in favor of the increased share capital proposal, a move that would pave the way for the successful completion of the rights issue. The final outcome of the rights issue, however, will only be known on April 6th, and will occur at a steep discount of 99% to the company’s valuation at its zenith (which amounted to $22 billion).

In a gesture aimed at bridging the gap with the disgruntled investors, the embattled edtech firm further offered “renounced shares” to existing shareholders. Renounced shares refer to those that were not purchased by existing investors under protest, during the rights issue. By offering these renounced shares, Byju’s is attempting to minimize the dilution of existing investor holdings, particularly those of the dissenting group.

For those who need a refresher, the roots of the current discord at the edtech major can be traced back to Byju’s pre-pandemic strategy. Flush with a valuation of $22 billion, the company had embarked on an aggressive acquisition spree, rapidly expanding its reach by snapping up multiple startups. This growth plan, however, was met with growing concerns from some key investors, and Prosus Ventures publicly voiced its disapproval of the company’s management style and its tendency to disregard investor recommendations on financial prudence. The simmering tension finally boiled over in 2023, with Prosus, Peak XV Partners and the Chan Zuckerberg Initiative (CZI), officially resigning from Byju’s board (Deloitte, its auditor at that time, parted ways with Byju’s as well).

Faced with a financial crunch, Byju’s initiated a rights issue in January 2024, allows existing shareholders the opportunity to purchase additional shares at a discounted price, proportionate to their current holdings. However, the move backfired as the disgruntled investor group, including Prosus, Peak XV, and CZI, chose not to participate, which further escalated tensions, led to legal action, brings us to the current situation. Byju’s did, however, gain some breathing room when National Company Law Tribunal (NCLT) refused to defer the EGM called by the company’s board.

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