Byju’s to extend renounced shares to agitated investors
Co gets majority vote to raise authorized capital to account for its $200-million rights issue
Byju’s will offer renounced shares to its dissenting investors who did not participate in its rights issue to prevent further dilution to their shareholding, the cash-strapped edtech firm said on Friday.
In a letter to shareholders, founder and CEO Byju Raveendran said that the company had secured more than 50% of the votes needed to increase the authorized share capital to accommodate its $200-million rights issue.
“Despite the animosity shown by some of the investors in pursuing uncalled for legal actions, we continue to show good faith towards all our shareholders and would like all of you to be part of our turnaround story,” Raveendran said in the letter, extending an olive branch to the company’s select investors who have complained of mismanagement and lack of corporate governance at Byju’s.
Byju’s held its extraordinary general meeting (EGM) early on Friday to augment the authorized share capital of the company, a proposal that sailed through without any objection from the investors who participated. Securing a majority vote for its proposal to increase authorized share capital means the company can issue fresh shares to investors. The company’s $200-million rights issue at a 99% cut from its peak valuation of $22 billion, achieved in 2022, was opposed by some of its existing investors, including Prosus Ventures, who did not participate
THE move follows the co’s success in securing majority votes to increase share capital
in the fundraise.
In a rights issue, if existing investors don’t participate, their shareholding gets diluted as a result of the additional shares issued by the company. Raveendran
added that the company had received “significant interest” from third parties, but will continue to prioritize “existing shareholders” by “extending” this offer.
“I hope you will see the value in continuing with Byju’s in the same spirit with which you first joined our journey. I look forward to your response and to our continued partnership to transform the global educational landscape.” Existing investors of Think & Learn, Byju’s parent, led by Prosus, had petitioned the National Company Law Tribunal (NCLT) Bengaluru to stay Friday’s EGM and block the rights issue fearing a near wipe-out of their investments, which was turned down by the bankruptcy court. The NCLT will next hear the case on 4 April.
Prosus, along with other investors including General Atlantic, and Peak XV had in an EGM in February voted to sack Byju Raveendran as the company’s CEO, and remove his wife and co-founder Divya Gokulnath, as well as his brother Riju Raveendran from the board. These decisions were part of a series of resolutions aimed at addressing governance, financial mismanagement, and compliance issues at Byju’s. The Karnataka High Court on Thursday extended the interim stay on the decision of the 23 February EGM to sack Byju Raveendran as CEO, adjourning the matter to 28 May.
In the NCLT, the investors had alleged that not all shareholders had been served the EGM notice, in violation of rules. Additionally, they argued, Byju’s did not allow them to inspect the documents to decide on how to vote for the EGM. However, Byju’s insisted that notice for the EGM had been sent to all the investors, and that opportunity was provided for the inspection of the said documents. While the NCLT’s decision came as a reprieve, Byju’s still faces challenges from investors who have questioned the legality of the rights issue and have sought a stay on the process.
The 4 April hearing will likely play a crucial role in determining the company’s ability to successfully raise funds and deal with its financial troubles, which include salary delays.