Byju’s is struggling to raise the full $200 million in rights issues that its founder previously claimed were oversubscribed, sources familiar with the matter told TechCrunch. And now India’s National Company Law Tribunal has barred the company from going ahead with the second rights issue amid allegations of oppression and mismanagement by its shareholders.
The Court on Thursday also ordered the company to maintain the status quo of its existing shares pending the disposal of the petition filed by two of its investors, General Atlantic and Sofina. Rights issues allow companies to raise capital by giving shareholders the opportunity to buy additional shares at a discount, relative to their current stake.
Byju’s had launched its first rights issue in late January, but a court order asked the company not to use the funds it had raised through that rights issue after many of its investors opposed the fund-raising. The Bengaluru-based startup had launched the fundraiser after trying to raise cash amid allegations of corporate governance gaps, and that rights issue knocked its valuation down to about $25 million, a stunning drop from its $22 billion price tag. which the startup once had. enjoy it.
The startup recently tried to raise money again from another rights issue as it tried to pay employees and continue operations, but that effort has now stalled.
Thursday’s court ruling is the latest episode in the spectacular collapse of Byju’s, once the world’s most valuable tech startup. It is backed by some of the most important 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 – along with the post-pandemic headwinds that propelled him to the top – but things began to go seriously downhill last year when Prosus, Peak XV and the Chan Zuckerberg Initiative stepped down from the board the company’s board, citing problems with governance practices, and Deloitte pulled the startup’s account. Prosus had said Byju’s was not “sufficiently developed for a company of this scale” and the Indian company “ignored the advice and recommendations” of its backers. Investors tried to oust the company’s founder and CEO, Byju Raveendran, from the company.
Some investors, including Prosus and Peak XV, have also accused Byju’s of violating an earlier court order and granting shares to some shareholders despite their pending case. Byju’s has been instructed to provide details of the allotment and keep all funds raised in a separate escrow account.
TechCrunch was unable to determine exactly how much Byju ultimately raised in the first rights issue. A representative for Byju did not respond to a request for comment.
“Our rights issue is fully subscribed and my gratitude to my shareholders remains strong,” Raveendran wrote in a letter to shareholders in February. In the letter, he urged his alienated investors to give him another chance and join the rights issue.
“But my benchmark of success is the participation of all shareholders in the rights issue. We have built this company together and I want all of us to participate in this renewed mission. Your initial investment laid the foundation for our journey and this rights issue will help preserve and create greater value for all shareholders.”
The court order comes after BlackRock wrote off its investment in Byju’s, giving the Indian company an implicit valuation of zero.
