From the Big Un Limited Market Update- Finstro of 08/02/2018:
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Brad Prout, CEO of FC Capital explains “Since 2014, BIG has been a valued partner of FC Capital, providing referrals to a large number of businesses that are aspiring to grow and can benefit from our cash flow management solutions. For clarity, Finstro advances payments in relation to BIG’s customers. Like many major retailers, by partnering with Finstro, BIG is able to offer its customers interest free payment terms, and no upfront cost of production”
Richard Evertz, CEO commented “BIG does not loan money to SME’s nor currently earn commission from Finstro on any loan subsequently taken up by SMEs. BIG values its ongoing partnership with Finstro which allows us to offer our customers alternate payment solutions for their video marketing packages. This has proved to be very popular with our customers and we are currently exploring the ability to offer similar options to our overseas customers. The ability to make it easy for customers to take up BIG products is key to market penetration and leveraging our first mover advantage.”
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In other words, BIG did not borrow the money that it reported as cash receipts from customers. Its customers borrowed it & paid it to BIG, which was justified in reporting them as cash receipts.
Furthermore, the auditor said, “All of our audits are conducted in accordance with the Australian Auditing Standards and our opinion on the 2017 financials was unqualified stating the financials gave a true and fair view of the company’s financial position and performance in compliance with Australian Accounting Standards and the requirements of the Corporations Law. As auditors of BIG we are satisfied that the company have in place an adequate system of internal control and operate the high standard of accounting practices required of any publicly listed company.”
In other words, there was nothing untoward here, & those who are trying to represent it as such are misrepresenting the facts.
From Response to ASX Query Letters of 23/02/2018:
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...a key reason that BIG's business model is so effective is that after a customer is on-boarded and signs a preliminary acceptance to make a video, 35% of the total amount agreed with the Customer is made immediately available by FCC for BIG to use. This provides BIG with access to working capital for the purposes of executing what it does best - making great videos. The remaining payment from FCC (net of fees) is held in a bank account nominated and controlled by FCC and is immediately available to BIG without restriction once the video is made and the Customer has accepted the video and agreed to make 12 monthly membership payments. This means that the access to these funds is within the control of BIG. The more efficiently it can produce and deliver the product, the faster these funds are available. Even if customers choose not to accept a video that BIG has created, under the FCC arrangement BIG has the ability to substitute them for other customers without penalty. This is a good arrangement for the customers also, as they are able to pay for their video interest free in 12 monthly instalments.
The arrangement with FCC (through its Finstro platform) enables the Company to offer SME businesses the ability to purchase BIG video subscription packages on deferred payment terms. Like many big retailers, by partnering with Finstro, BIG is able to offer its SME customers interest-free deferred payment terms and no upfront cost of production.
Currently, approximately 35% of BIG’s contracts globally are financed by FCC (as described below).
On 9 August 2017, BRTV signed a sponsorship arrangement with FC which documented the continuing relationship between the parties. The arrangement enables BIG to continue to offer its SME customers interest-free deferred payment terms and no upfront cost of production.
The parties to the Sponsorship Agreement dated 9 August 2017 are First Class Securities Pty Ltd (FC), BRTV and Transact Payments Pty Ltd (Processing Agent) (Agreement). BIG is not a party to the Agreement.
The Sponsorship Pool is made available by FC in reliance on the security interests granted and obligations in favour of FC. In consideration for making the Sponsorship Pool available, BRTV agrees to permit FC to market its financial products to the Customers and assigns (to FC) BRTV's right to receive payment of the Membership Fee.
Given BRTV's large number of Customers, to date BRTV has had no issue in being able to replace a Declined Customer with another. Consequently, BRTV has not had to pay any Cancellation Fees to FC pursuant to the Agreement.
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In other words, the finance is provided by FC to BIG's customers. BIG is not a party to the financing agreement, & neither did it have a problem with too many customers declining to accept a video. Also, this financing arrangement only affected 35% of its customers. So what went wrong?
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On 8 February 2018 the Australian Financial Review published an article in which it was stated that "Shares in the Company had dived 40% from $2.75 to $1.60 last Friday after the online video company “admitted” that its customers are advancing funds by FCC."
The Company considers this reporting to be misleading for a number of reasons. As described above, the relationship between FCC and the Company is information which has been previously disclosed on the Company's ASX platform and has been publicly available for a long period of time. Had AFR conducted its research with more diligence, this would have been apparent to AFR also. Instead, AFR's reporting tried to make it appear as though it had discovered significant new information which the Company had been trying to withhold, which is simply not the case. BIG openly discloses the existence of the FCC financing options to its customers and other stakeholders. Approved customers have the choice whether to finance their video packages through FCC or to pay upfront for the package.
In relation to the Company's share price, what the AFR failed to mention was that ASX had its worst week since January 2016, as part of a global financial markets correction and that there were a number of other factors which are likely to have contributed to the Company's share price movement.
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So why did they go into voluntary administration?
From the Shareholder Update of 22/05/2018:
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BIG Un Limited (ASX:BIG, or ‘BIG’) wishes to inform stakeholders and the market that the directors of Big Review TV Ltd ('BRTV'), a wholly owned subsidiary of BIG, have placed BRTV into voluntary administration.
The purpose of BRTV entering into voluntary administration is to allow for the restructure of its business via a Deed of Company Arrangement (‘DOCA’) and preserve value for shareholders of BIG Un Limited.
The aim of the negotiations is to allow the restructuring of BRTV which is intended to emerge from this process as an ongoing Australian concern. The negotiations remain to be successfully concluded and implemented.
BIG Un Limited will continue to operate the BHA Media Pty Ltd and Food and Beverage Media Pty Ltd businesses, which will continue to be run by existing management, from existing premises.
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In other words, it is in voluntary administration for the purpose of restructure, not because of anything untoward.
As for the Administrator's view, in the Shareholder Update of 20/06/2018 we have:
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As the return to creditors in the proposed DOCA exceeds that expected under a liquidation, we are of the opinion, subject to the assumptions and qualifications hereunder, that it is in the creditors' interest that the Company execute the DOCA.
As a deed has been proposed which will provide a greater return to creditors than an immediate winding up of the Company, we are of the opinion that it is not in the creditors' interest that the Company be wound up.
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In other words, the company still has value & will not be wound up.
Then in the Shareholder Update of 02/07/2018 we have:
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The intention of the DOCA and the other transactions described above is to allow BIG and BRTV to continue to trade and preserve value for shareholders of the Company. As a result of the arrangement, BIG and its subsidiaries will be able to continue operating their principal business of producing video content and operating a social video review platform. BIG intends to provide a more fulsome update in relation to its ongoing business activities pursuant to the new arrangements.
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So contrary to a lot of other opinions here, the sky is not falling.
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