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Here's Why Naked Brand Stock Surged Today

By Joe Tenebruso – Aug 20, 2021 at 5:29PM

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A game-changing merger could be on the horizon.

What happened

Shares of Naked Brand Group (NAKD) jumped 10.1% on Friday after the swimwear and intimate-apparel company announced that it reached a preliminary agreement on a potential acquisition. 

So what

Naked is a popular stock among investors on social media sites like Reddit. This popularity helped to drive its share price sharply higher earlier this year. Naked took advantage of the opportunity to raise cash by selling shares. That, combined with its asset sales, allowed Naked to eliminate its debt and placed it in a position to potentially acquire other e-commerce businesses. 

Naked sold off its remaining brick-and-mortar operations in April. The move completed the company's evolution into a fully e-commerce-based business. With $270 million in cash reserves and no debt, Naked then intensified its hunt for value-creating acquisitions. 

An upwardly sloping stock chart.

Naked Brand Group's stock price rose sharply on news of a potential acquisition deal. Image source: Getty Images.

Now, it appears that Naked has found what it was searching for. "We have recently reached a preliminary agreement on non-binding terms and are now conducting due diligence," chairman and CEO Justin Davis-Rice said during Naked's annual shareholder meeting on Friday. "The company is in a sector which has been forecast to have strong growth for many decades to come." 

Now what

Investors can expect to hear more details about Naked's current deal soon, though management cautioned that it may not progress beyond its early stages. "There is, of course, no guarantee that we will complete the deal, on the preliminary terms we have negotiated, or at all," Davis-Rice said.

Joe Tenebruso 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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