Round 10 by my count? Surely this was meant to be the knockout blow?
I was hoping we might see some analysis of the ASX response letters, I guess they don't have much time to do a deep dive into issues unless someone pays consultants to do some background research and then send through an executive summary ala the Ownership Matters report before or after they set themselves up on market. We still don't know who paid for that little gem do we Shapiro? Maybe you don't either in all fairness. Tough gig being a journo, trying to make it while being the puppet of smarter people than you or I.
Anyway without further adieu, puff piece 10:
Macquarie chairman Peter Warne maintains silence over FC Capital links
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Macquarie Chairman Peter Warne became a shareholder of Sydney finance company FC Capital just a month before it formalised its arrangement with Big Un Limited. Daniel Munoz
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by
Jonathan Shapiro
Macquarie chairman and ASX board director Peter Warne has maintained his silence about his involvement in FC Capital, the Sydney financing company at the centre of the Big Un Limited sharemarket controversy.
Mr Warne, along with former BT colleague Ian Moore, were allocated free shares in the privately-owned lender in September 2017 by FC Capital chief executive Brad Prout, a month before it formalised its long-standing finance arrangement with Big Un TV.
Mr Warne did not respond to questions seeking clarification and knowledge of the arrangement. That followed attempts
this month to contact Mr Warne about his knowledge of FC Capital's arrangement with Big Un Limited.
However, Mr Prout said "no shareholders other than those operationally engaged in the business of FC Capital are aware of the specific details of our clients or our trading terms with them".
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On Friday, written responses to an "ASX Aware" letter revealed a financing arrangement with FC was responsible for $18 million of its $22.5 million cash receipts reported in the final quarter of 2017. Michel O'Sullivan
Sources close to Mr Warne also claimed he had no knowledge of the transactions and dealings of FC Capital.
Big Un's shared soared 1600 per cent in 2017 to make it the top performing stock that year, as its sales to customers soared. That, it has become evident, was largely on account of financing advanced to it by FC Capital.
FC Capital in turn was issued more than 3 million shares in Big Un between October 2017 and January 2018 at discounts of more than 90 per cent to the share price at the time of issuance, effectively resulting in paper gains of $10.5 million for FC Capital's shareholders.
Mr Prout also confirmed that FC Capital's publicly available share register was not up to date after a number of share transfers "done in late 2017".
Under scrutiny
FC Capital has come under scrutiny after Big Un was forced to
disclose details of its unusual financing arrangement by its subsidiary Big Review TV to the ASX.
Big Un remains suspended from the exchange pending further inquires from the ASX and the corporate regulator after i
t failed to disclose material details about its financing arrangement with FC.
On Friday, written responses to an "ASX Aware" letter revealed a financing arrangement with FC was responsible for $18 million of its $22.5 million cash receipts reported in the final quarter of 2017.
Under the $20 million facility with FC, 35 per cent of each dollar advanced to Big is diverted to a separate bank account used by Big to pay for videos of "potential customers", while 24 per cent of the amount is immediately repaid as a commission to FC. The remaining 41 per cent is held in a bank account nominated by FC, which Big says is under the control of FC.
The full amount of each dollar advanced is understood to be recorded by BIG as "receipts from customers". If the customer declines the service, Big says it is able to replace that "potential customer" with a new one.
Customers are also offered $15,000 "interest free" facility with Finstro, a subsidiary of FC. Customers who accept a video on these terms enter into a direct financing arrangement with FC, but give Big the authority to directly debit their accounts as the service is provided.
Big disclosed that it was reconciling the numbers but expected to have "approximately 791" "accepted customers" under the arrangements with FC.
The FC Capital "sponsorship" has almost certainly been behind Big Un's impressive cash generation, which propelled its share price from 20¢ at the start of 2017 to a peak of just under $5 in late November.
'Inadvertent' breach
The arrangement with FC first began in December 2015, but was not formally documented until August 2017. FC agreed to advance financing directly to Big Un once the sales team had secured an agreement to be filmed as part of a sponsorship with FC subsidiary Finstro, even though there was no formal commitment from the customer to buy the service.
The announcement confirmed that it had "inadvertently breached" ASX listing rules by failing to reveal that in November 2016 Big had agreed to issue FC 2.5 million shares as part of the deal and a further 530,303 shares as payment for a $116,666.67 invoice.
The shares were issued at 20¢ per share, discounts of between 91 per cent and 94 per cent of the price at the time of issue, on October 20, November 17, December 22 and January 5.
FC Capital provides financing to small and medium-sized businesses. The company is understood to
have had a business relationship with Big Review TV from about the time it was formed in 2013. In late 2015 FC Capital subsidiary Finstro signed its first sponsorship deal with Big Review TV.
However, FC appeared to ramp up its provision of financing to Big in November 2016 after a verbal agreement to extend millions of dollars of financing to the ASX-listed firm that produces videos for small businesses such as beauty salons, coffee shops and hotels. The agreement was formalised in November 2017.
Mr Warne has served on the board of the ASX since 2006 and was appointed the chairman of the board of Macquarie Group in September 2015.
Mr Warne and Mr Moore are understood to have been former colleagues of Mr Prout at investment and trading firm Bankers Trust and sources said the trio had several joint investments in the past.
Mr Prout is a motor sports enthusiast and a promotion for the 2015 Finke Dessert Classic, which he contests in, is t
he seventh most watched video in the history of Big Review's platform with more than 233,450 views.
FC Capital provides lending to small businesses and specialises in "factoring" or lending against customer invoices.
The firm also has a funds management arm which has raised tens of millions of dollars from wealthy individuals in Sydney and Melbourne, attracted to double-digit rates of return.
First Class Capital was also a creditor to collapsed ASX-listed firm Stargroup, as its funds management arm First Class Capital Management
penned a deal to sell short-term loans to its small business clients.
The lender is owed more than $6.7 million. Mr Prout is also listed as a secured creditor and is owed $325,000.
