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Why Big Un Ltd could have big problems

Big Un Ltd (ASX: BIG) shares could be suspended for a while longer, judging by the company’s announcement to the ASX on Friday.

Big Un Ltd was first placed into a trading halt on 17 February following media reports from Fairfax Media, and queries from the ASX. Big Un entered voluntary suspension on 19 February to allow the company more time to respond to ASX’s queries.

After releasing a 43-page response to the exchange’s queries on Friday morning, ASX simultaneously placed Big Un into involuntary suspension “pending further enquiries by ASX and ASIC”.

While the responses are very detailed, they do appear to contain some concerning items such as news that Big Un pays a 24% commission to its sponsorship partner, FC Capital. Big Un also admitted that it had “inadvertently breached ASX Listing Rule 3.10.3” by not announcing an agreement to issue shares. Listing rule 3.10.3 says that a company must notify the market of a proposed issue of new shares.

Big Un also stated that it has many shares that have been approved but not yet issued. This means that its market capitalisation is a lot larger than it may have appeared. Prior to Friday, the most recent announcement from Big Un appeared to show that the company had 172 million shares on issue, which at the latest price of $2.22, would give it a market capitalisation of approximately $380 million.

However, Friday’s announcement showed that, fully diluted, (including approved but not yet issued shares and options) Big Un has 224 million shares on issue. This gives the company a market capitalisation of $497 million, which is significantly higher.

With ASX and ASIC’s enquiries ongoing and the stock suspended, there is little that Big Un shareholders can do at this point. We will have further coverage when Big updates the market again.

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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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