What happened
After brokerages resumed trading in their stocks, shares of GameStop (GME 2.56%), Express (EXPR), and Naked Brand Group (NAKD) surged 68%, 28%, and 19%, respectively, on Friday.
So what
Following several days of volatile trading, Robinhood and other trading platforms placed restrictions on their customers' ability to buy shares of GameStop and other highly shorted stocks. That resulted in an outcry from investors and lawmakers alike. Robinhood quickly backtracked and allowed its users to buy shares of these companies again on Friday, though in limited amounts.
Image source: Getty Images.
Traders -- many of whom have coordinated their purchases on sites like Reddit -- took this as an opportunity to once again drive up the prices of several heavily shorted stocks. They hoped to further short squeezes that fueled gains of several hundred percent in recent days.
Naked Brand Group has used its newfound gains to raise roughly $50 million in cash via a stock sale. In this way, traders have helped the intimate apparel company strengthen its balance sheet and improve its near-term outlook.
GameStop and Express are reportedly considering whether they, too, could raise capital following their stock price rallies.
Now what
It's possible that all three companies could find willing buyers for their shares if they're able to conduct stock offerings amid the current trading frenzy. That could fundamentally alter their business prospects for the better.
However, the share prices of GameStop, Express, and, to a lesser extent, Naked Brand Group all now reflect tremendous levels of investor optimism, so much so that it's unlikely that they will ever be able to justify their current valuations. Thus, investors who continue to hold their shares are taking on substantial risk of loss.
