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Why PLBY Group Popped 11% at the Open Today

By Reuben Gregg Brewer - Jun 29, 2021 at 11:05AM

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Shares of the iconic owner of the Playboy brand went higher on an event that would normally push a stock lower. Here's what you need to know.

What happened

Shares of PLBY Group (PLBY -2.57%), which calls itself a pleasure and leisure company, rose a quick 11% as trading got under way on June 29. The reason for the price jump was pretty clear: The company put out a news release outlining an acquisition that augments its direct-to-consumer growth plans.

So what

Earlier this morning, PLBY Group reported that it was buying Australian lingerie upstart Honey Birdette for $333 million in cash and stock. The stock component will amount to $95 million or roughly 2.2 million shares. That values Honey Birdette at about 12 times trailing-12-month adjusted EBITDA, according to PLBY Group. Very often the acquiring company in a deal sees its stock fall in value, but not this time around. A part of the reason for this is that PLBY Group has attracted the attention of the Reddit crowd and emotions are high. Thus, news updates sometimes result in price moves that aren't what one might expect.

A person making it rain 100 dollar bills.

Image source: Getty Images.

That said, since coming public via a blank check company earlier in 2021, PLBY Group has been building out a direct-to-consumer business via acquisitions. Honey Birdette adds a third distinct brand to its portfolio beyond the core Playboy name. It looks like a good long-term move, noting that Honey Birdette has expanded rapidly (over 30% compound annual sales growth between 2019 and current estimates for 2021) and has a young, loyal customer base (60% of customers are repeat business, 80% of customer traffic is organic, and the brand has 1.1 million Instagram followers). Add in that the company's product is at the premium side of the lingerie sector and it looks like a very good complement to PLBY Group's other adult-themed offerings.

Now what

PLBY Group stock is up nearly 300% so far in 2021, so today's move isn't exactly massive, relatively speaking. However, today's price jump was preceded by an important business update that investors do need to know and think about (this hasn't always been the case this year, thanks to the Reddit boards). That said, after the speculative rally this stock has had this year, conservative investors would probably be better off watching the ups and downs from the sidelines because a lot of good news appears to be priced in at this point. But it is still worth noting PLBY Group is building a very real business here and that could make it worth keeping on the wish list, just in case there's a pullback.

Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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