Byju’s, which was once India’s most valuable startup with a valuation of $22 billion, is now worth essentially nothing.
Byju’s board has approved a rights issue to raise $200 million from existing investors at a post money valuation of $225 million. This means that Byju’s, as it stands today, is valued at just $25 million, a stunning 99.9 percent lower than its valuation of $22 billion just over a year ago. Even Byjus’ post money valuation of $225 million is 99 percent below its peak valuation of $22 billion.
The rights issue will start on 22nd January, and will be valid for the next 20 days. A rights issue gives existing investors of a company the chance to acquire even more of its shares. Rights issues can sometimes be valued at lower rates than the fair market rates to enable existing investors to buy more shares.
Regardless, a pre money valuation of $25 million suggests Byju’s is worth almost nothing after being embroiled in a series of controversies over the last few quarters. The coronavirus pandemic had had caused investors to pump into into the company, and Byju’s saw its valuation soar. But even as it was snapping up companies both in India and abroad, cracks had begun to appear. Byju’s had delayed filing its FY21 financial results for so long that even the Indian government commented on the issue. The results hadn’t made for pretty reading — Byju’s had lost Rs. 4,588 crore in FY 21 — and Byju’s had then proceeded to lay off thousands of employees. Around this time, questions had been raised in Indian parliament about Byjus’ alleged mis-selling of courses to economically vulnerable parents, and even the country’s child rights body had summoned CEO Byju Raveendran for questioning.
But things kept getting worse — not long after, the Enforcement Directorate had raided CEO Byju Raveendran’s home, and seized incriminating documents over violation of foreign exchange laws. Since then, Byju’s has seen its valuation marked down by several investors, and the company had tried to restructure its loan obligations. Byju’s had then been sued by its lenders, but it had gone on to sue them back and refused to pay back its loans amounting to $1.2 billion. Not long after, 3 of Byju’s board members had resigned in unison over concerns over its corporate governance , and a day later, its auditor, Deloitte, had also resigned. The ED had also issued the company a show-cause notice for contravening FEMA guidelines to the tune of Rs. 9,000 crore, and the company had been taken to NCLT court by BCCI over missed payments of its team India sponsorship which it had eventually transferred to Dream11.
Earlier this month, Byju’s was valued at $1 billion by its own investor BlackRock. And with the company now issuing a rights issue at a valuation of $225 million, Byju’s appears to have lost nearly all of its value. This is an extraordinary unravelling of Byju’s, which now has seen its value fall by Rs. 1,76,000 crore in just two years. Few companies in corporate history have managed to stage comebacks after seeing their valuations slashed by 99.9 percent, and Byju’s will need to move heaven and earth — and perhaps even more — to remain a going concern in the foreseeable future.