© Source: Shutterstock White undergarments hang on wooden hangers against a white background.
Life is funny sometimes. On Aug. 13, InvestorPlace contributor Will Ashworth understandably complained about the radio silence regarding intimate apparel and swimwear retailer Naked Brand Group (NASDAQ:NAKD). Just a week later, the company issued an update that could substantially alter the trajectory of NAKD stock.
© Provided by InvestorPlace White undergarments hang on wooden hangers against a white background.
Ashworth was 100% right to express concern about Naked Brand.
The online lingerie company, which licenses the Frederick’s of Hollywood brand, was in dire need of a positive catalyst.
As of Aug. 25, the Naked Brand press releases page offers very little to eager investors. There are a few superficial announcements about an annual shareholder meeting and not much else from the past several months.
The next thing you know, a U.S. Securities and Exchange Commission (SEC) Form 6-K pops up online, and the situation changes drastically. Whether it’s good news or bad, I’ll let you decide – but either way, it can’t be ignored.
A Closer Look at NAKD Stock
As Ashworth duly pointed out, it’s important for NAKD stock to stay above $1 for 10 consecutive trading days. This isn’t just about technical analysis. Rather, it’s necessary for the stock to remain in compliance with Nasdaq.
When Ashworth’s article came out, Naked Brand had 50-plus trading days to meet the 10-day requirement.
“That’s a big stretch,” he succinctly assessed.
I tend to concur with that assessment. Yet, sometimes the seemingly impossible happens in the markets.NAKD stock was around 53 cents on Aug. 13. Since that time, the share price has risen steadily. It trades at around 75 cents today. Could the crucial $1 level be next? Maybe, the meme-stock traders on Reddit could help Naked Brand clear that hurdle.
That might sound far-fetched, but let’s consider what took place in January. Evidently, some mysterious force pushed NAKD stock up to $3.40.
That mysterious force may have been the Reddit traders since the meme-stock phenomenon was in full effect in January.
Marking a Transformation
It’s entirely possible that social-media traders will band together and pump up the Naked Brand share price again. However, it’s probably not a reliable investing strategy to buy the shares now and sit on your hands in hopes of a massive short squeeze.
Instead, it’s better to stay informed on the company’s latest developments – though admittedly, Naked Brand’s press releases page doesn’t offer much in the way of usable recent data.
So instead, you’ll have to look elsewhere. But don’t worry – for the time being at least, I’ve got you covered. InvestorPlace contributor William White also has you covered, as he provided an in-depth review of Naked Brand’s pivotal SEC filing.
The filing starts out innocently enough, with Naked Brand Chairman and CEO Justin Davis-Rice declaring, “This year has marked the transformation of Naked.”
Exciting and Vague
Presumably, Davis-Rice was referring to Naked Brand’s divestiture of its Bendon brick-and-mortar operations. He was likely also thinking of his company’s balance-sheet solidification, resulting from multiple strategic capital financings.
Ultimately, these helped Naked Brand to achieve a net cash position of $270 million after repayment of all previous bank debt.
Fair enough, but the investors wanted something more than this. And boy, they sure got it.
Apparently, Naked Brand is making progress in its quest to partner with a “substantial company.”
“I am delighted to confirm we believe we have found such a company. We have recently reached preliminary agreement on non-binding terms and are now conducting due diligence,” Davis-Rice said. “The company is in a sector which has been forecast to have strong growth for many decades to come.”
Sorry, but that’s all you get for now. Believe me, I understand that Naked Brand’s announcement is both exciting and frustratingly vague.
The Bottom Line
Except perhaps for the company’s C-suite insiders, no one knows for sure whether Naked Brand will actually finalize a partnership/merger agreement with another company. It’s also unclear which company this might be, or even what sector it’s in.
But hey, at least there’s something new and intriguing going on with Naked Brand. It was enough, evidently, to goose the NAKD stock price in the short term.
In the long term, though, it’s really anybody’s guess what will happen, so check back as new developments arise.
On Penny Stocks and Low-Volume Stocks: With only the rarest exceptions, InvestorPlace does not publish commentary about companies that have a market cap of less than $100 million or trade less than 100,000 shares each day. That’s because these “penny stocks” are frequently the playground for scam artists and market manipulators. If we ever do publish commentary on a low-volume stock that may be affected by our commentary, we demand that InvestorPlace.com’s writers disclose this fact and warn readers of the risks.
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.
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