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Why Naked Brand Group Stock Fell 15.3% Last Month

By Keith Noonan – Nov 4, 2021 at 9:10AM

Key Points

  • Excitement surrounding the company's acquisition of a clean energy company appears to have waned.

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The business is struggling, but the stock is up 267% year to date.

What happened

Shares of Naked Brand Group (NAKD) slid 15.3% in October, according to data from S&P Global Market Intelligence. The once high-flying meme stock lost ground amid dissipating excitement surrounding a potential acquisition and concerns that the company will not be able to meet compliance standards needed to remain listed on the Nasdaq Stock Market. 

NAKD Chart

NAKD data by YCharts

Naked Brand stock skyrocketed early in this year's trading after gaining favor as a meme stock and generating excitement with its plans to drive growth through e-commerce and acquisitions, but shares also trade down roughly 79% from their 52-week high. There wasn't any business-specific news behind the stock's sell-off last month, but it looks like investors lost some interest in the swimwear and apparel company's stated plan to acquire a clean energy company. 

A person looking at a computer.

Image source: Getty Images.

So what

Naked Brand Group announced late in September that it had identified a disruptive acquisition opportunity in the clean energy space. CEO Justin Davis-Rice stated that the company in question was a "market leader with cutting edge patented proprietary technology" that would satisfy environmental, social, and governance (ESG) mandates. The sell-off for Naked Brand stock in October largely appears to be the result of excitement surrounding this announcement cooling off. 

Investors also got some news about the stock's Nasdaq-listing status last month. Naked Brand published a press release on Oct. 27 announcing that it had received a 180-day extension in order to meet compliance standards. This is the second extension the company has received, and it's currently on track to expire on April 25, 2022. In order to remain listed on the Nasdaq, Naked Brand stock will have to maintain a minimum closing bid price of at least $1 for at least 10 consecutive trading days across the new extended period. 

Now what

Naked Brand stock has been making significant gains early in November's trading. The company's share price is up roughly 22% in the month so far. 

NAKD Chart

NAKD data by YCharts

Naked Brand currently has a market capitalization of roughly $639 million, and its stock trading will likely hinge on the extent to which its acquisition plans are successful. The potential move into the clean energy space seems like an odd fit for the company, the core business hasn't been putting up encouraging results, and it's possible that a pivot could give the company a new spark. 

As for the stock's Nasdaq status, there's a fair chance that the company will be able to remain listed on the exchange. While investors opting to bid and maintain the stock above the $1 level would be the preferred path to achieving this, Naked Brand could also carry out a reverse stock split -- combining existing shares into a smaller number of shares that represent equivalent value.

Keith Noonan has no position in any of the stocks mentioned. The Motley Fool recommends Nasdaq. The Motley Fool has a disclosure policy.

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