From $22 billion to $225 million: Byju’s faces 99% valuation cut after launching $200 million rights issue

Byju’s, formerly renowned as the world’s most valuable edtech startup, has experienced a significant downturn, slashing its valuation by 99% in a recent rights issue launch. The Bengaluru-headquartered company, facing financial challenges, seeks to secure $200 million via this initiative, viewed as crucial to managing its operational funds and averting additional value depreciation.

The sharp decline positions the company’s post-money valuation in the range of $220 million to $225 million, a notable departure from its peak valuation of $22 billion in 2022. Byju Raveendran, Byju’s founder, has informed shareholders about the substantial personal investments made by the founders, amounting to over $1.1 billion over the past 18 months, to sustain the business.

Byju’s has faced a severe funding crunch, leading to this rights issue. The company, known for its aggressive acquisition strategy, spending $2.5 billion on over a dozen firms in 2021 and 2022, has been chasing new funding for nearly a year. The startup’s plans for an IPO and a $1 billion funding round were derailed due to market conditions and internal challenges, including the resignation of senior leadership, key board members and auditors.
Despite the reduction in valuation, Byju Raveendran remains optimistic about the company’s prospects, asserting that Byju’s is on the brink of achieving operational profitability within a quarter. Reports from the media suggest that the funds raised will be allocated towards clearing immediate liabilities and fulfilling operational needs, while safeguarding the rights of existing shareholders.

Furthermore, Byju’s is confronted with legal hurdles, as a significant portion of its creditors has lodged an insolvency petition with the National Company Law Tribunal (NCLT) Bengaluru. This development unfolds as the company engages in negotiations with lenders to settle its $1.2 billion Term Loan B debt. Byju’s refutes these claims as “premature and baseless,” emphasizing that the validity of the lenders’ actions is being contested in various proceedings, including before the New York Supreme Court.

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