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Why Naked Brand Stock Soared Today

What happened

Shares of Naked Brand Group (NASDAQ: NAKD) surged 21.8% on Monday, as investors' excitement about a potential game-changing acquisition reached a fever pitch.

So what

Naked Brand's popularity among traders on Reddit and other social media sites helped it raise cash via stock offerings earlier this year. After ridding itself of debt and amassing a war chest of $270 million, Naked Brand's management team went hunting for takeover targets.

On Friday, the company announced that it had found a "disruptive opportunity" in the clean energy industry that could serve as a potential merger partner.

Naked Brand Group's stock price is up sharply since announcing progress toward a possible acquisition. Image source: Getty Images.

"During my career as an owner and operator of many diverse businesses, I have always been attracted to commercial opportunities that benefit our environment and help contribute to the growing ESG mandates that major corporations are implementing today across the globe," CEO Justin Davis-Rice said in a press release, referring to environmental, social, and governance mandates. "This company is a market leader with cutting edge patented proprietary technology that we believe satisfies those ESG mandates."

Davis-Rice cautioned, however, that he could make no assurances that a deal would be completed.

Now what

Even if an agreement is reached with this as-yet-undisclosed company, entering a completely different industry than its current swimwear and intimate-apparel business certainly has its risks. So, investors may want to approach its shares with caution.

Nevertheless, Naked Brand was back to its meme-stock ways on Monday. Mentions of its stock on Reddit soared 683% over the past 24 hours, according to data analysis site Memeberg Terminal, which no doubt contributed to its share price gains on Monday.

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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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