BIG (ASX) Stakeholder Update 27 March 2018

Originally posted by skyva ↑

Anyone who thinks appointing DLA Piper is a plus for the company doesn't understand companies.

You only get them involved when you are in deep doodoo.

Paying high priced lawyers does not add value to your firm. It does not add revenue, add customers or add capability. You are paying them to get back to square one with minimal damage.

Paying software developers, advertisers etc adds value.

If they are gearing up for a fight with ASIC, or even just getting their defense in order, expect 6 figure invoices from your lawyers over the next few months. If they go to court, easily goes to 7 figures. And if the directors/executives get charged, they will burn whatever shareholder money they have left to get them off. That is your money, shareholders, not being spent on growing the company. And how much time do you expect them to put towards growing the company vs keeping their butts out of goal?

The shareholder update tells me:
1. The company is putting on a brave face and wants to let everyone know they are still trying to move forward. They have new directors that have a track record of raising money in "interesting" environments. And maybe they have some good advisers to get them out of any trouble and hopefully keep them out of trouble. This is good.

2. That after more than a month suspended, they have nothing to offer and no real news. No expectations of when the reports will be lodged, or when they expect shares to trade. Nothing about the company operations. Only "we have lawyered up really good". That is bad.

And whilst some argue about the bona fides of the new directors, none have experience growing a tech company, and none have AUSTRALIAN experience with compliance or governance. Surely those would be high on the shopping list given the present situation.

Lets hope the next announcement is actually about how the company is operating, and some guidance on when the new accounts will be released. Given the executive seems largely intact, surely they will be able to provide guidance if the new accounts do not significantly alter the position of the company?

My concern is that the business model relied on a loan facility that is likely to not be available moving forward. Regardless of accounting treatment, if the facility is withdrawn, it may make future revenue very difficult to come by. Given the negative publicity for BIG and their financiers, I doubt the current business model will continue.

Can BIG survive purely on cash generated from actual sales? Given it was issuing shares in lieu of payment, it seems it might not have been able to survive on it revenue even with the loan facility. Paying in shares is also likely to be off the table as well for future financing.

If the finance co has withdrawn or the facility has been exhausted, that would have to be disclosed before they trade again, along with either dilution from share issuance.

And provision for liabilities from future lawsuits.

Actually, given the above it is not surprising they have not made a substantive announcement.

Interesting times ahead.

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How can you see the engagement of lawyers as a bad thing? Every company engages lawyers it is standard business practice to outsource this responsibility.

The fact that the market has been told that their lawyers will advise on governance matters at the Board level (as well as other undisclosed matters I'm sure) is a positive. It gives me confidence as a shareholder that they are prepared to get advice to ensure these issues do not happen again. It also signals that the new Board that is shaping up is not going to rely on gut instinct for important legal issues.