Thread by @jshilanjanm

Can we put an end to the #FakeNews that Byju’s is raising $1bn at $22bn valuation!? 😓😓

Break the numbers shared below the headlines, and the beans spill out!

The truth 👇

$1bn is what Byju's is reportedly chasing. Though visibility in the media is all about $950m.

This sum can be broken down into 2 parts 👉

1️⃣ A 3yr $250m convertible debt from Davidson Kempner Capital Management (DKCM) which is not known to invest in startups, but in financially distressed companies against significant equity & big interest rates

Like it bought #Adani bonds when they had crashed after #hindenburg

2️⃣ A $700m equity fund-raise from the Middle-East

Let’s understand the 1st part in detail & then move to the second one.

The 3yr $250m convertible debt is linked to Aakash Educational Services Limited (offline coaching) which Byju’s acquired for $1bn some time ago.

🔆 Means, if Byju’s fails to repay the debt in 3yrs, whenever Aakash goes for an IPO or a fund-raise, DKCM will be allotted Aakash’s shares at a sig. discounted valuation

🔆 This $250m has not been raised by Byju’s at a $22bn valuation.

To state it clearly, once again 👇

It’s a sum against an agreement that whenever Aakash raises funds next, the lender will be allotted shares at a discounted valuation.

Phew! 🫡🫡

Thus, if anything can be true after that, its that Byju’s is raising the remaining $700m at $22bn valuation! Alas, even that’s false 😓

Let’s break the $700mn equity fundraise.

Byju’s is TRYING to raise an OVERALL sum of $700m.

Of this though, there are 2 parts.

1️⃣ A primary round which will it is TRYING to raise at $22bn valuation

2️⃣ A secondary round which will be raised at <$18bn valuation to give partial/complete exit to select existing investors

Why?

Context: Byju’s raised a massive $1.2bn Term Loan B some time ago.

This loan was linked to the condition that Byju’s valuation must not drop below $18bn mar

🔆 If it does, several strict but undisclosed clauses of the loan would trigger, which will give lenders more control over the company

🔆 Thus, the $700m fundraise is being structured such, that the blended valuation of the primary & the secondary will come down to $18bn

How will this benefit Byju’s and its investors?

🔆 Though the secondary will mean a partial exit for some investors at a lower valuation, the early investors would have made a great return

🔆 Meanwhile, there will be a sum raised at $22bn valuation for the founders to show the world, that Byju’s holds strong and well

🔆 Plus, the lenders of the term loan will be at bay, just as they have been all this while

Meanwhile, there is no guarantee that the $700m will come at all! ❌❌

Byju’s had similarly announced a successful $800m fundraise in 2021, of which $400m never came.

Just, it’s better to wait and watch, than to announce a big win!

😅😅

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Tags: @BYJUS | #Byjus #Edtech #Startups #IndianStartups