Representative image. (Source: ShutterStock)
Byju’s early backers, including Lightspeed Investment Partners and Chan Zuckerberg, are looking for buyers for their partial or full stakes in the edtech company Byju’s, as they plan to book profit and make an exit, four people aware of the development informed Mint.
A few have laid out ‘soft’ mandates to investment banks to look for buyers, they said, requesting anonymity, the report said.
“These investors have been around for a long time and would be now looking to cash out. The talks are in initial stages, and final valuation is yet to be decided,” said one of the four people, who added that a deal could be struck at a 25-30% discount to the company’s last funding valuation, as per the report.
Moneycontrol could not independently verify this news development.
Despite rumours that some investors are looking to exit, an executive of the company said no investors are looking to leave.
In share purchase agreements with Think & Learn Investors, founder Byju Raveendran has the right of first refusal. This clause entitles him to purchase investor shares before anyone else. Hence, even if selling investors find buyers at a particular valuation, Raveendran has the option to match or exceed that price.
In this way, Byju’s could prevent his company’s valuation from dropping.
According to Bloomberg last week, Raveendran, who holds around 25 percent in the company, intends to increase his stake to 40 percent. Several financiers and investors are in discussions with Raveendran about raising money to buy back existing investors’ shares, according to the report.
If a secondary share transfer is to take place, the company’s board would need to approve it.
The company was valued at $22 billion at its last valuation. Companies raise primary capital through the issuance of new shares at a premium to secondary transactions, in which shareholders sell shares to existing or new shareholders.
Byju has been backed by Sequoia Capital, General Atlantic, Lightspeed Venture Partners, Qatar Investment Authority, Owl Ventures, General Atlantic, CPPIB, Tiger Global, Tencent, Verlinvest, and Sofina.
According to Tracxn data, Chan Zuckerberg Initiative and Lightspeed hold 2.4% each of Byju’s.
In an interview in September, Raveendran said he would be willing to buy these investors out. “I am the biggest backer of my own company. I will buy out these investors even if they sell it (their stake) at $15 billion,” he said after the company announced its FY21 earnings.
The discussions come at a time when the edtech decacorn is in talks with private equity firm TPG Capital to raise capital. However, TPG has not yet submitted a bid for Byju’s despite hiring a consulting firm to perform due diligence. “The TPG-led round is going to be a convertible one,” said the second person with knowledge of the company’s plans.
Convertible rounds allow an investor to invest money into a company that converts into equity only in the next round, providing a discount to the incoming investor.
In addition, the second person cited above said that the overall market correction had taken a toll on primary valuations, which will also affect secondary share sales. “It is likely to be as low as $14 billion. Remember, these people would still make healthy returns. Everyone wants to take some money off the table, and it is likely that others also want to part-sell,” the person added.
A $50 million round of funding was raised in September 2016 by Byju’s along with existing investors Sequoia Capital, Belgian investment firm Sofina SA, Lightspeed Venture Partners, and Times Internet Ltd.
Chan Zuckerberg Initiative is a personal fund set up by Facebook Inc. founder Mark Zuckerberg and his wife, Priscilla Chan.
In the past year, Raveendran raised $400 million from global investors in order to purchase fresh shares.