Why the Big Un Ltd share price is getting smashed

The Big Un Ltd (ASX: BIG) share price continues to plunge, falling 38% to $1.71 this afternoon, following a concerning article from Fairfax media this morning. Fairfax reported that Big Un had been issuing discounted shares to FC Capital, the company that provides finance to Big Un’s customers:

One possible explanation is that the shares could be paid to FC Capital to compensate them for possible defaults on behalf of Big Un customers. This is speculation on my part, as the exact concern wasn’t made clear in either the Fairfax article or in Big Un’s ASX release yesterday. In its initial sponsorship agreement with FC Capital in December 2015, Big Un did not appear to make any mention of shares being issued to FC Capital.

Big Un stated that it doesn’t receive any commissions from FC Capital, so it is not clear exactly what the discounted shares were issued for. It seems as though there may be more to come from this story, and for now I would watch from the sideline.

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Motley Fool contributor Sean O'Neill has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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