Naked Brand Group’s Latest Pivot Was the Death Blow

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Naked Brand Group (NASDAQ:NAKD) stock was a great meme stock story earlier this year. Its stock quadrupled in late January after the firm announced plans to divest its brick-and-mortar operations in favor of e-commerce.

a man and woman wear plain white underclothes from Naked Brand (NAKD)
Source: Shutterstock

 

Redditors loved the narrative and they charged in. That demand spiked prices, and Naked Brand Group management deftly took advantage of the situation. 

Great Timing

Naked Brand Group took advantage of the spike in attention as well as any struggling company has during the pandemic. When it announced the pivot to ecommerce its shares were trading at approximately 40 cents. They shot up to $1.75 on the news.

Management quickly issued a direct offering of 29.415 million shares of stock at $1.70. That resulted in around $47 million of proceeds, making the struggling retailer suddenly relevant. 

The idea was that Naked Brand Group would utilize the proceeds to revitalize its lingerie and swimwear brands under an ecommerce business model. It seemed like a strong narrative with a reasonable likelihood of success given its roots and new found capital underpinning the pivot. 

Enthusiasm around NAKD stock waned after the big move, but at least the possibility was still there. Equally importantly, it was logical. The company hoped to become more relevant in the world of retail. By pivoting to ecommerce it had a legitimate chance of doing so. 

That hope was dashed in November when Naked Brand Group announced yet another change. 

EV Company

On Nov. 8 the company announced it would be changing its name to Cenntro Automotive Group after acquiring the outstanding stock in the three entities comprising it. That move was yet another pivot for the firm this year. 

Although it didn’t seem like the most logical combination, markets reacted positively to the news. NAKD stock spiked by about 15% as the markets digested what it meant. 

They’ve since faltered, reverting back to the 50 cent levels NAKD stock had been trudging along at since April. 

Synergy or Pivot

If you’re like me, you’ll likely be scratching your head as to why Naked Brand Group would attempt to pivot from clothing retail into EV technology. There’s simply no connection between the two. It’s difficult to see how there is any carry-over between the two at all. 

Rather, it seems to signify another pivot for Naked Brand Group. And in my estimation it also signifies a great time to get out of NAKD stock entirely. 

For its part, Cenntro Automotive Group has some positive factors worthy of consideration. The company’s self-professed strengths lie in AI for autonomous driving as well as the manufacturing of light and medium duty commercial EVs. 

Further, Cenntro makes some fairly bold claims about its prowess, stating: “Cenntro has sold and delivered more Commercial Electric Vehicles than any other EV company; Customers are estimated to have traveled more than 20 million miles in 26 Countries in Cenntro EVs. Cenntro Expects 2021 Revenue of $25.3 million with over 1,500 vehicle sales, $506 million on 21,500 vehicle sales in 2022 and $2.1 billion on 74,800 vehicle sales in 2023.”

Ultimately though, it should strike investors as strange. Naked Brand Group made sense when it took advantage of meme stock fervor and issued stock after announcing its ecommerce pivot. 

Now it’s moving into EVs? There’s no connection. 

Takeaway

I can’t see any reason to invest in Naked Brand Group at this point. To me it has gone from one of the better narratives to come out of meme stock mania, to one of the strangest ones. Investors will have trouble believing that it deserves attention in the EV space. Capital will not rush toward the shares for that reason.

Don’t forget, NAKD stock still has the same listing compliance issues that it always has. There’s no reason it should logically move above $1 in my opinion.

On the date of publication, Alex Sirois 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.

Alex Sirois is a freelance contributor to InvestorPlace whose personal stock investing style is focused on long-term, buy-and-hold, wealth-building stock picks. Having worked in several industries from e-commerce to translation to education and utilizing his MBA from George Washington University, he brings a diverse set of skills through which he filters his writing.


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