Investors seek stringent anti-dilution clauses, control over founders in the wake of Byju’s fiasco

“It finally collapsed,” was the first reaction of many investors when they saw troubled edtech major Byju’s launch a rights issue at a whopping 99% discount to its previous valuation. Everything that has followed, however, has seen any schadenfreude replaced by concern.

While Byju’s is aiming to raise $200 million through the rights issue to address an immediate liquidity crisis, the drastic decision has put the company’s investors in a bind. As The CapTable had reported earlier, many of the edtech’s biggest investors have lost hope in the company turning things around under the current leadership of founder-CEO Byju Raveendran. 

Following the announcement of the rights issue, these investors even called for an extraordinary general meeting in an attempt to oust Raveendran. The company responded to this by stating that the shareholder agreement does not grant investors the right to change the CEO or management, forcing these investors to contemplate whether participating in the rights issue will be akin to throwing good money after bad. With the rights issue being held at such a steep discount, however, not participating would see their positions on the company’s cap table all but wiped out since they have no anti-dilution protection.