Byju’s promoters have sold shares worth $408.53 m in secondary deals wince FY16

July 4, 2023
Posted by: OptimizeIAS Team
Category: DPN Topics

Byju’s promoters have sold shares worth $408.53 m in secondary deals wince FY16

Subject :Economy

Section: Capital Market

Context: Byju’s promoters – Byju Raveendran, Divya Gokulnath and Riju Ravindran have been reported to have sold shares worth around $408.53 million in the secondary market since 2015.

Key Points:

Raveendran’s brother and a member of Byju’s board Riju Ravindran sold shares worth $375.83 million since 2015, whereas Raveendran’s wife and co-founder Gokulnath sold shares worth $29.40 million.
Meanwhile, Raveendran sold shares worth $3.28 million since 2015, while also purchasing shares from multiple sellers including members of his family and employees of the company since 2012
Raveendran, in a recent mail to employees, also said that he has reinvested all the money received from the secondary sale of shares.

Secondary Market

A Secondary market is a market where investors purchase securities or assets from other investors, rather than from issuing companies themselves.
Generally this is associated with the stock market. But this is not necessary as unlisted securities (shares before an IPO has been released) can also be traded between investors.
This is called an Over-the-Counter Market which is a decentralized market in which market participants trade stocks, commodities, currencies, or other instruments directly between two parties and without a central exchange or broker.

Primary Market.

The Primary Market, often referred to as the new issue market, is a financial market where new securities, such stocks or bonds, are issued and sold by firms or governments, and other groups go to obtain financing through debt-based or equity-based securities.
Primary markets are facilitated by underwriting groups consisting of investment banks that set a beginning price range for a given security and oversee its sale to investors.

How does a promoter enhance ownership or reinvest

Promoters are given some special rights when it comes to investing in the company. This can take several forms, some of them being:

Preferential shares issues – This is an offering of shares or convertible securities to a select group of investors, usually promoters, to raise capital. This helps promoters boost stake and provide the company with much-needed capital.
Warrants – In this route, the promoters get a right to acquire new shares from the company at a fixed price by paying some money upfront. After warrants are allotted to the promoters, then they may approach the company any time within a time period and get shares at the predetermined price.
Rights issues – A rights issue is an invitation to existing shareholders to buy additional new shares in the company. Thus, all existing shareholders can choose to exercise this ‘right’. Often, only a few like promoters exercise this ‘right’.