It certainly hasn’t been easy to stay the course with intimate apparel and swimwear retailer Naked Brand Group (NASDAQ:NAKD). Investors have had to deal with the huge price moves of NAKD stock, sometimes even on a daily basis.
Some folks likely took a position in Naked Brand Group as a wager that shoppers would return as the post-Covid-19 economy improves. In other words, they’re seeing it as a “recovery stock.”
Others might view NAKD stock as a potential short squeeze target. And indeed, if the Reddit crowd grabs hold of this stock, it could quickly double, triple or more.
Those angles are worth exploring, no doubt. Yet, there’s a particular price point which I’d like to bring to your attention today – it’s a line in the sand that should, and must, be crossed.
NAKD Stock and the Meme Trade
Make no mistake about it: NAKD stock is capable of moving very fast, and by that I mean in both directions.
Therefore, it’s not appropriate for risk-averse folks. And if you do choose to make an investment, please keep your position size small.
That being said, it’s entirely possible for NAKD stock to quadruple in a matter of days. I can say this with confidence because it’s actually happened this year.
On Jan. 26, the shares were trading at 39 cents. Then the market went bananas as the stock price soared above $1.60 on Jan. 29.
Is it possible that Reddit users were responsible for this jaw-dropping run-up? That would be hard to prove, but I suspect that the meme-stock mob may have been involved.
After all, NAKD stock would have been a perfect meme-trade target. It’s low-priced, it’s not a blue-chip stock and Naked Brand Group could be considered an underdog in the market.
In any case, the party ended in January and the share price embarked on a multi-month decline. By July 22, the stock was down to around 56 cents.
At the same time, Naked Brand Group has trailing 12-month earnings per share of around -43 cents. Without a doubt, that’s a tough pill for value-focused investors to swallow.
Fighting for Compliance
During the second quarter of 2021, Covid-19 vaccines were being distributed to millions of people. The runway was clearing, it seemed, for a return to semi-normalcy.
All was not well with Naked Brand Group, however. On April 29, investors learned that the company had received a letter from the Nasdaq Exchange’s Listing Qualifications Department.
Trust me, this wasn’t the kind of letter that any business would want to receive.
Apparently, the minimum bid price of NAKD stock had fallen below $1 for 30 consecutive business days.
Consequently, Naked Brand Group was out of compliance with Nasdaq Listing Rule 5550(a)(2).
The threat of being de-listed from the Nasdaq Exchange is unsettling. The last thing the stakeholders want is for Naked Brand Group to have to move its shares to an over-the-counter (OTC) exchange, as that’s basically a demotion.
Is the Writing on the Wall?
Fast-forward to July 2021, and NAKD stock is still below that crucial $1 level.
Don’t get me wrong – I’m not claiming that Naked Brand Group isn’t attempting to right the ship.
Specifically, the company moved forward with plans to jettison its Bendon brick-and-mortar operations in April.
With that, Naked Brand Group is better positioned to focus on e-commerce and on its Frederick’s brand, which is being used under a license agreement with Authentic Brands Group.
On the other hand, the company has a limited time to get its act together.
Naked Brand Group was given a period of 180 calendar days – until Oct. 25 – to regain compliance with the minimum-bid-price requirement.
Hence, if the bears want to say that the writing is on the wall, they might have a valid point.
The Bottom Line
The clock is ticking, and Naked Brand Group is facing the possibility of having its shares de-listed from the Nasdaq Exchange this year.
Granted, the meme-stock traders might swoop in and save the day with an epic short squeeze.
Is that something which the current shareholders should count on?
Probably not – and if NAKD stock doesn’t reach $1 soon and stay there, the company and the investors could be in an unenviable position.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.