Byju investors vote to fire founder

In a surreal moment for Byju, once India’s most valuable startup, investors voted to remove founder and CEO Byju Raveendran and filed an oppression and management suit against the firm’s leadership to block the recently launched rights issue.

A group of investors, including Prosus Ventures and Peak XV Partners, decided to alter the startup’s leadership during an EGM today. An investment source said the participating shareholders, whose total ownership in Byju’s surpassed 60%, also approved the proposal to reconstitute the board. Two of Byju’s associates denied that participating stockholders owned over 60% of the company. The sides have not released official numbers.

Raveendran and other board members skipped Friday’s EGM. Byju’s said earlier this month that its shareholders couldn’t vote on leadership changes at the edtech business.

At today’s extraordinary general meeting, shareholders overwhelmingly approved all motions. The shareholder group requested the resolution of BYJU’s governance, financial mismanagement, and compliance issues; the reconstitution of the Board of Directors so that it is no longer controlled by T&L’s founders; and a change in leadership, according to Prosus, one of Byju’s largest investors.

As shareholders and important investors, we are confident in the EGM meeting’s legality and final conclusion, which we will now bring to the Karnataka High Court in accordance with due process.” Four Byju investors, representing 25% of the business, sued the National Company Law Tribunal on Friday to stop the rights issue.

After more than a year of dissatisfaction among Byju’s major investors, who say the $22 billion Indian edtech giant has skimped on responsibility, the decision came on Friday.

Byju’s said on Friday that only a “small cohort of select shareholders” attended the EGM and dismissed their proposals as “invalid and ineffective.”

In 2021 and 2022, Byju’s, which has raised $5 billion, spent over $2.5 billion on acquisitions. A decade-old Bengaluru business is intended to go public in early 2022 via a SPAC offer for $48 billion. Byju’s IPO was scrapped when the market changed.

Byju’s has sought money for almost a year. Deloitte and three important board members—Prosus, Peak XV, and Chan Zuckerberg Initiative—left the firm unexpectedly last year, delaying $1 billion in fundraising negotiations.

After a technical default on a separate $1.2 billion term loan, Byju’s raised less than $150 million from Davidson Kempner and had to reimburse the investor the whole amount.

Late last month, Byju’s announced a rights offering to raise $200 million at a steep discount. Raveendran informed shareholders earlier this week that the rights offer had been fully subscribed and asked all current investors to participate and retain ownership.

“We built this company together, and I want us all to join this renewed mission. Your original investment started our adventure, and this rights issue will maintain and increase shareholder value, he said. “[…] I realize that participation in this rights issue may seem pointless. This is our last remaining alternative to avoid irreversible value erosion.”