While it appeared to be one of 2017’s biggest share market success stories, the downfall of SME-focused video marketing company Big Un was swift and troubled, with administrators recommending last week the company be wound up as debts will likely go unpaid.
A promising company in its early days, a number of questionable deals and practices by the company resulted in the market darling entering a month-long trading halt, before eventually de-listing and calling in voluntary administrators.
Much of the investigation into Big Un was spearheaded by The Australian Financial Review, with the full run-down of the company’s troubled inner dealings shining a light on yet another tech company seemingly unprepared for the obligations of life as a listed company.
However, if you’re just getting caught up to speed, here’s most of what you need to know about what happened to Big Un.
Big Un Limited and its subsidiary company Big Review TV was founded by Brandon Evertz and his father Richard Evertz in 2012, with the idea for the company reportedly coming to the two after a months-long campervan trip around Australia. The young founder, just 19 at the time of starting Big Un, later said it took the two a “good six months to nail the right idea”.
After that time, the founder received $500 from his father to buy some business cards and establish a website landing page. Four weeks later, Evertz told SmartCompany, he had already earned more than $8000.
That idea was to sell Australian small to medium businesses on the future of video, providing them video content on YouTube for marketing and reviews on the cheap, with Evertz believing there was a gap in the market to provide this to local SMEs at a “fraction of the traditional market costs”, as they wouldn’t otherwise be able to afford it.
The company offered more than just video production, however, operating through a Software-as-a-Service model to provide SMEs with the option of signing up to Big Un’s services on a 12-24 month subscription basis, which reportedly cost $12,000. The company also offered a video review platform called BRTV, which was an online platform that hosted the YouTube videos of the companies, and provided a platform for users to review the company via video rather than text.
Two years later after it was founded, Big Un listed on the Australian Securities Exchange via a merger with a defunct gold mining company called Republic Gold, a takeover which cost the company $12 million at the time.
Big Un raised $3 million from investors at the time of its listing in late 2014, and for a number of years the company puttered along with some mediocrity, its shares fluctuating between $0.10 to $0.20 as the company continued to build out its platform and customer base of Australian small businesses.
In mid-2016, Evertz went to the media to share Big Un’s story, which seemed like nothing but successful at the time. Speaking to SmartCompany at the time, Evertz spoke about the company’s 50% quarter-on-quarter growth, its projected $6 million revenue figure, and its 14,000 SME customers across the country.
“Growth in demand for video content is becoming very, very high. Since January this year, we’ve had more than 1 million views per month,” he said at the time.
The company also started to ramp up its marketing efforts towards small businesses, with Evertz himself appearing in a video spruiking the company and inviting business owners to be “a part of something big”.
Fairfax reports the company also completed a $2.6 million capital raise during June 2016, and later in the year, switched its audit firm from a reputable Melbourne-based company to a two-man operation, which reported prided itself on “minimum fuss” audits.
At the start of 2017, everything seemed to be going right for Big Un. In April the company updated the market, reporting its revenue growth from customers’ cash receipts was at $5.6 million, up 372% on the same quarter last year.
The company also announced it continued to be cash flow positive with a cash surplus of $1.2 million, and a pipeline of 24,500 users, along with an 82% increase in paying subscribers.
With these seemingly impressive results, the company’s share price started to rally, sitting at $0.50 at the time of announcement and skyrocketing throughout the year as the company continued to release stronger and stronger results; cash receipts reportedly came in at $9.4 million in July and in $15 million in October.
The share price peaked at $1.80 in late July, before starting another downturn as the year moved through its later months, however, it took off again in October, jumping from $1.35 to $2.86 by the end of the month. At this point, Big Un had firmly cemented itself as one of the best-performing stocks of the year.
Things didn’t slow down in November either, with Big Un shares peaking at an all-time high of $4.58 in the middle of the month before dipping to $4.06 by the start of December. This rally was partially fuelled by the news the company was expanding into the US through an acquisition of a small consumer platform called Tipsly for $4.2 million.
At the time, Evertz told Fairfax much of the acquisition was due to the large SME market the app had, which would allow the company to “heavily” push into the States.
“Tipsly is a fantastic purchase as it can help us with our tech mobile application and also it has over 100,000 SMEs in that acquisition as well. It gives us a beach head in the States for us to on-sell our video,” he said.
According to Fairfax, investors had long questioned Big Un’s processes for selling videos to Australian small businesses. Questions over why businesses would pay a reported $12,000 to have a video created and uploaded to YouTube were causing increasing concern around the business’ operations.
Additionally, reports emerged that numerous reviews on the company’s website were identical to others posted on other websites, and web experts were drawing into question the company’s reported viewership numbers.
It was seeming like something big was lurking below the surface for Big Un, as investors stared in disbelief over the shares’ 1,600% increase over the 2017 calendar year.
Smelling a rat in late 2017, Fairfax dug deep to find the source of investors discontent with Big Un, emerging in early February with an investigation that spelt the downfall of the troubled company. The report revealed sales staff at Big Un were not only trying to get SMEs to sign up to the company’s video services, but to finance the operation via a loan from Finstro, an arm of small business lender FC Capital.
According to a sales script obtained by Fairfax, sales staff were telling SMEs they could get a special deal with FC Captial, which included a “free trial of their cash flow management tool and a pre-approved $15,000 drawdown facility”. Additionally, FC Capital was also found to be a significant shareholder in Big Un, holding around $9.3 million in shares at the time of the revelation.
Those shares were purchased from Big Un at a price of $0.20, even when shares were publically trading at $3.31.
“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,” Richard Evertz, chief executive of Big Un said at the time, defending the company’s involvement with Finstro.
“The ability to make it easy for customers to take up BIG products is key to market penetration and leveraging our first mover advantage.”
The fallout from the investigation led to Big Un’s shares dropping 40%.
Later that same month, Fairfax also revealed Big Un had granted security over its assets to FC Capital. FC Capital chief executive Brad Prout confirmed to Fairfax this mean FC Capital had a “General Security Agreement which secures the performance obligations of BIG Un under the sponsorship agreement”.
After this news, the company’s shares were put into a trading halt, and were suspended from official quotation pending an ASX investigation.
The company responded to a number of questions from the ASX, revealing in the process it had paid a 24% commission to FC Capital and had “inadvertently breached ASX Listing Rule 3.10.3” by not announcing an agreement to issue shares.
After shares remained halted throughout the year, Big Un called in administrators from Deloitte in late August to oversee a potential sale of the company.
Just last week, The Australian reports a final report from administrators has recommended Big Un be wound up, after finding the video marketing company had likely been trading while insolvent for more than a year.
The administrators also reportedly found a number of the company’s directors ‘likely’ committed multiple breaches of the Corporations Act, however, administrator Neil Cussen said investigations are still ongoing.
“A detailed investigation into the possibility of breaches by the directors has not yet been completed. A liquidator, if appointed would investigate any potential breaches of director’s duties. Our investigations in relation to these potential breaches are ongoing,” Cussen reportedly said.
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If you’re a small business owner who dealt with Big Un, get in touch with your experiences at news@smartcompany.com.au
