> I don’t know how this is going to end but I do know that the end date of the rights issue is in two days and no court is this fast. It’s unlikely either court decides in time. So probably the rights issue will happen and the investors who don’t invest get booted out automatically?
Can NCLT decide the rights issue is invalid, so the ownership is as it was before the rights issue (and presumably the company is required to give all the money back)?
I look forward to all your posts! Btw if the existing investors don’t participate in the rights issue, they will typically be eligible for downround protection, isn’t it? i.e. they’d be eligible to get an additional number of shares to make up for the down round.
Downround protection would depend on the contract the investors signed with the company. There might be some smaller investors with anti dilution clauses, but it's unlikely the others had it, considering the lengths they're willing to go to to stop Byju.
Even if they do have the clause, there are ways to bypass it via majority shareholder approval. Though I don think think that's what's happening here.
We'll know more specifics in the due course of time though, of course.
My understanding is that most large investors would have the anti dilution rights! But considering how the founders here dictated the terms with the investors- like you’re saying- the investors wouldn’t have been terribly bothered if they had that right!
Usually early investors do. But it's also worth noting that Byju's until recently has been the star of the startup industry. Its valuation with successive rounds has only gone up. Raveendran had a lot of bargaining power. He could very well have used this bargaining power in his favour while raising following investments.
One quick question, what happens if every shareholder decides to participate in the issue and buys those shares at discount? How can a company create value in this case?
It isn't possible unless some shareholder sells stake in a rights issue, isn't it?
If every shareholder decides to buy then the final ownership will be the same as it is now. Every shareholder would only be able to buy more shares proportionate to their current holding.
I have seen Byjus and the current management to literally Lie like anything. And the first principle to respond to any rumor in media was to clearly say “NO thats not true” or just lie “we are looking at it”.
If there is one thing that i know about Byju is - If he is saying 47% investors want him out then its a Lie, if he says 47% it’s definitely 67% or more, the remaining equity is with his family and ranjan.
> I don’t know how this is going to end but I do know that the end date of the rights issue is in two days and no court is this fast. It’s unlikely either court decides in time. So probably the rights issue will happen and the investors who don’t invest get booted out automatically?
Can NCLT decide the rights issue is invalid, so the ownership is as it was before the rights issue (and presumably the company is required to give all the money back)?
Once Byju's gets the money and can spend it the way it likes, it's tough.
But the NCLT found a midway, it let the rights issue happen but asked Byju's to store the money in escrow: https://www.business-standard.com/companies/news/nclt-asks-byju-s-to-keep-funds-via-rights-issue-in-escrow-account-124022801163_1.html
So now we're in this place of limbo where the right issue is done but the money isn't with Byju's yet. As one might've predicted, Byju's is going to argue that not having this money is going to be existential for it: https://indianexpress.com/article/business/companies/byjus-salaries-rights-issue-funds-locked-investors-9192154/
Let's see where this goes.
I look forward to all your posts! Btw if the existing investors don’t participate in the rights issue, they will typically be eligible for downround protection, isn’t it? i.e. they’d be eligible to get an additional number of shares to make up for the down round.
Thank you!
Downround protection would depend on the contract the investors signed with the company. There might be some smaller investors with anti dilution clauses, but it's unlikely the others had it, considering the lengths they're willing to go to to stop Byju.
Even if they do have the clause, there are ways to bypass it via majority shareholder approval. Though I don think think that's what's happening here.
We'll know more specifics in the due course of time though, of course.
My understanding is that most large investors would have the anti dilution rights! But considering how the founders here dictated the terms with the investors- like you’re saying- the investors wouldn’t have been terribly bothered if they had that right!
Usually early investors do. But it's also worth noting that Byju's until recently has been the star of the startup industry. Its valuation with successive rounds has only gone up. Raveendran had a lot of bargaining power. He could very well have used this bargaining power in his favour while raising following investments.
One quick question, what happens if every shareholder decides to participate in the issue and buys those shares at discount? How can a company create value in this case?
It isn't possible unless some shareholder sells stake in a rights issue, isn't it?
If every shareholder decides to buy then the final ownership will be the same as it is now. Every shareholder would only be able to buy more shares proportionate to their current holding.
I have seen Byjus and the current management to literally Lie like anything. And the first principle to respond to any rumor in media was to clearly say “NO thats not true” or just lie “we are looking at it”.
If there is one thing that i know about Byju is - If he is saying 47% investors want him out then its a Lie, if he says 47% it’s definitely 67% or more, the remaining equity is with his family and ranjan.
The scammer had really pulled the wool over everyone's eyes!