For quite a while, Naked Brand Group (NASDAQ:NAKD) was known as an intimate apparel and swimwear retailer. This wasn’t an ideal business model during the spread of Covid-19, and as a result, NAKD stock investors have struggled throughout much of 2021.
Sure, there was the meme-stock rally in January but Reddit traders seem to like underdog stocks, so they gifted Naked Brand’s shareholders with an epic short squeeze. However, that wasn’t a gift that keeps on giving.
As the meme-stock sheen faded, NAKD stock sank below the crucial $1 level. Easy come, easy go, as they say. Still, Naked Brand’s investors shouldn’t give up hope yet, as the company’s undergoing a major transformation with an environmental, social and governance (ESG) angle.
A Closer Look at NAKD Stock
The $1 level is psychologically significant, but there’s more to it than that. Sometimes, the Nasdaq exchange may choose to de-list a stock if it drops below $1 and stays there. Unfortunately, NAKD stock fits that description — therefore may be subject to de-listing threats.
Such a treat actually occurred in April, as Naked Brand was non-compliant with Nasdaq’s $1 minimum bid-price requirement. Nasdaq gave Naked Brand 180 days to regain compliance with that rule. After that time ran out in October, Nasdaq gave another 180 days.
It’s a shame, really, because the shareholders were given a false sense of hope in January. During that month, a meme-stock rally pumped NAKD stock all the way up to $3.40.
Checking in today, the stock is trading at around 60 cents after having drifted sideways for a month and a half. With this, Naked Brand really needs a major event to give the investors something to get excited about. A headline-grabbing buyout could do the trick, right?
It Started with a Hint
By September, it was evident that Naked Brand couldn’t rely on Reddit traders to save the company and its stock. Yet, something significant was afoot. The company had already announced the divestiture of Naked Brand’s bricks-and-mortar Bendon operations. In an update from Chairman and CEO Justin Davis-Rice, it became evident that something even more consequential was going on. He said:
“I am happy to report that after extensive searching and due diligence, we believe we have found a disruptive opportunity in the clean technology sector.”
No real specifics were provided but the CEO did throw Naked Brand’s investors a bone, saying, “This company is a market leader with cutting edge patented proprietary technology that we believe satisfies those ESG mandates.”
Fast-forward to early November, Naked Brand agreed to acquire the outstanding stock shares of commercial electric vehicle (EV) technology company Cenntro Automotive Group.
Important Meeting on the Agenda
This isn’t just a pivot to ESG, however, it’s a complete transformation of the company. Admittedly, Naked Brand picked a potentially huge winner of a company with this stock-share takeover.
Allegedly, Cenntro has sold and delivered more commercial electric vehicles than any other EV company. I haven’t verified that claim, but for what it’s worth, it’s mentioned in Naked Brand’s press release.
Moreover, apparently customers are estimated to have traveled more than 20 million miles in 26 countries in Cenntro EV’s.
Also, Cenntro has more than 238 patents issued to protect its intellectual property. The company expects to generate 2021 revenue of $25.3 million and 2022 revenue of $506 million.
Just recently, Naked Brand revealed that a general shareholder meeting will take place on Dec. 21 to (hopefully) approve the Cenntro takeover.
The Bottom Line
It’s hard to imagine that the shareholders won’t approve Naked Brand’s merger with Cenntro. This event will represent not just an evolution, but a transformation. Naked Brand won’t really be the same company after this. So, adjust your investment strategy accordingly.
If you’re ready for Naked Brand to potentially abandon the lingerie business and jump head-first into clean automotive tech, feel free to buy and/or hold a few shares of NAKD stock.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
David Moadel has provided compelling content – and crossed the occasional line – on behalf of Crush the Street, Market Realist, TalkMarkets, Finom Group, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.
