The board of embattled edtech firm Byju’s will offer renounced shares to dissenting shareholders who did not participate in its rights issue to avoid further dilution to their shareholding, the company told its shareholders on Friday.
This development follows the company’s success in securing over 50% of the votes needed to increase the authorized share capital, paving the way for 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,” founder and chief executive Byju Raveendran said in a letter.
Securing a majority vote for its proposal to increase authorized share capital means the company can issue fresh shares to new investors, helping it raise $200 million through a rights issue at a 99% cut from its peak valuation of $22 billion achieved in 2022, which has been a subject of intense scrutiny and legal battles.
Raveendran added that the company has 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 moved the National Company Law Tribunal (NCLT) Bengaluru to stay a scheduled extraordinary general meeting (EGM) and block the rights issue fearing a near wipe-out of their investments last month. Prosus along with other investors including General Atlantic, and Peak XV, voted to remove Byju Raveendran and his family from the board of Byju’s during an EGM.
This decision was part of a series of resolutions aimed at addressing governance, financial mismanagement, and compliance issues at Byju’s, as well as changing the leadership of the company.
However, the debt-laden edtech startup moved a step closer to addressing its liquidity issues on Thursday after the NCLT refused to stay the EGM to augment the authorized share capital, giving effect to its $200-million rights issue.
The NCLT has listed the case for a hearing on 4 April.
Investors have argued that they were not permitted to inspect documents to decide on their voting stance at the EGM and alleged that not all shareholders received the notice as required by law.
However, Byju’s contended that investors were provided with an opportunity for inspection and that the EGM notice was duly served to all shareholders, as per a Moneycontrol report.
While the NCLT’s decision provides 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.
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Published: 29 Mar 2024, 10:42 AM IST