What happened
Shares of intimate apparel retailer Naked Brand Group (NAKD) were up as much as 20% on Tuesday with traders from Reddit and Twitter piling into the stock. As of 3:40 p.m. EDT, shares were up 16% on the day.
So what
Naked Brand Group was one of the meme stocks that soared back in January along with the mania in GameStop stock. Shares shot up almost 800% year to date last winter when traders from Reddit piled into the stock. The stock subsequently crashed from its highs, but still remains up 200% this year. The current share price is $0.58, making it a penny stock. Having such a low share price is likely why the stock continues to be popular among the day-trading crowd.
Image source: Getty Images.
When shares shot up this winter, Naked Brand Group management took full advantage, raising $47 million in a common stock offering at $1.70 a share. The lingerie brand also divested its Bendon brick-and-mortar operations. After both transactions, Naked Brand Group had $270 million in cash on its balance sheet and no debt. The company is now solely focused on its lingerie e-commerce offering.
Now what
Naked Brand Group was able to nicely take advantage of the jump in its stock price back in January and February, raising $270 million in cash with the stock offering and divestiture of the Bendon brick-and-mortar operations. These moves were likely two wins for Naked Brand Group, and shareholders rightly rewarded them. However, this is still a penny stock, and a company that has never generated an annual profit since going public back in 2018. Individual investors should stay away from the company until that changes.
