Market veteran investor Safir Anand has called out the private equity investors who supported the crisis-driven ed-tech startup Byju’s in the midst of troubled times. In the latest development, three board members and auditors are leaving the company by resigning from their positions. There are ongoing reports which say that the Ministry of Corporate Affairs is deeply looking into the matter after the resignation news came out from the Bengaluru-headquartered company.
Anand who is a reputed investor and a property lawyer shared his thoughts on social media by writing the complete mess as an absolutely ridiculous thing. RPG Group Chairperson Harsh Goenka tweeted about the increasing tensions of the ed-tech company Byju’s. He wrote that not only Byju’s but also its private equity investors thought that the buck will pass forever under a greater fool theory. Byju’s was valued at around $22 billion startup in 2023.
Anand is known for his skill to find good opportunities in the mid and small-cap space. Harsh Goenka shared his disbelief at the way the edtech company was valued despite having so many issues at the ground level. Goenka wrote out 11 such problems such as:
“Deloitte auditor quits, audited report of even FY22 not published, the legal case against lender, 3 directors resign, mass layoffs, default on employees PF, White Hat model flawed, post-pandemic education moved offline, many customer complaints, sale of hardware around 80 percent and expected loss they say Rs 10,000 crore.”
“If all this is true, what’s the true valuation? $22 bn? Mera dimaag fail ho gaya hai!,” Goenka wrote on social media.
Devina Mehra who is the First Global chairperson and managing director commented on Anand’s tweet on greater fools by saying that such a theory worked in the past. She wrote on Twitter, “The greater fool theory does work for a lot of the time including during the 2021 IPO frenzy! As I had pointed out at the time, most IPOs were at 2-3 times the valuation of the last round with VCs and had large ‘offer for sale’ components… so VCs did find the Greater Fools”.
For the unversed, the great fool theory is dependent on the principle that when a company’s valuation is not based on the basics or actuals but on an exaggerated narrative. An investor can find a greater fool or a person who is willing to invest at a higher price to get into the business, which means a highly risky investing strategy.
Byju’s has disheartened not just the common public but all its stakeholders. Despite the company making huge promises of revolutionizing education, there are discrepancies in all the activities that the company has been doing. There is a lot of backlash from the media, especially considering no representatives of Byju’s come out in the public domain and clear the air. It is high time that all the allegations based on Byju’s is cleared off by making the public know what exactly is the company’s status and how it wants to go forward.