Naked Brand Group Ltd (NASDAQ: NAKD) is screaming for the top in the market this morning, trading on gains that are better stated in multiples than percentages. If you’re looking for press releases or SEC filings that act as the catalyst, you’ll be hard pressed to find anything.
So, what’s going on?
Retail investors have been looking for stocks with heavy short interest to squeeze the shorts out and generate compelling growth. That seems to be what’s happening with NAKD stock today.
Skip to What You Want to Read
- Naked Brand Group stock Is Squeezing the Shorts
- Are Moves Like These Even Legal?
- Risks to Consider Before Buying NAKD Stock
- Final Thoughts
Naked Brand Group stock Is Squeezing the Shorts
As mentioned above, Naked Brand Group is screaming for the top in the market this morning with no news to back up the run. So, what’s the deal?
Recently, there has been a major effort by retail investors to squeeze shorts out of their positions.
It all started with GameStop, then went to AMC, Express, and others. Members of the message board, Wall Street Bets, have been assigning targets with quite a bit of short interest, and jumping in head first, pushing the shorts out of their positions, leading to a short squeeze, and realizing dramatic gains as a result.
NAKD is experiencing the same type of move. While the company hasn’t issued very much news lately, it does trade with heavy short volume and a relatively small public float, making it the perfect target for a squeeze. As such, retail investors are latching onto NAKD stock and shorts are losing their shirts.
Are Moves Like These Even Legal?
I got a call from my cousin yesterday asking if I had seen what was going on with GameStop, and whether or not moves like these were even legal.
First and foremost, I’m not an attorney. I can only answer this question based on what I know of the market, not the law. Nonetheless, I don’t see anything illegal about what’s happening with NAKD or what happened with Gamestop, AMC, and Express.
The fact of the matter is that while this may seem to be manipulation, there is nothing wrong with retailers talking about what they’re going to do on social media, and forming groups around their moves. That’s what investing message boards are all about.
Nonetheless, since big money has been losing money on these short squeezes, and will likely lose money on the NAKD stock short squeeze that’s taking place today, there has been a hot debate as to whether or not these actions should be allowed.
I’m on the retail side my friends.
Like other retail investors, I get tired of seeing massive firms place massive short positions on stocks that are doing seemingly well, destroying retail shareholder value in the process. In my view, it’s about time these institutional shorters get what’s coming to them and start realizing that there are victims associated with their moves.
So, back to the first question, is this legal? Can retail investors really push NAKD and its cohorts up in the market without getting in trouble? Sure they can. There’s nothing wrong with talking to your friends about your investments.
As long as false or misleading information isn’t being spread and there are no insiders taking part in the activity, there’s nothing legally wrong about a short squeeze.
Risks to Consider Before Buying NAKD Stock
Part of investing is accepting risk. No matter which investment vehicle you choose to go with, risk will be involved. When it comes to an investment in Naked Brands Group, some of the most significant risks to consider include:
- Lack of a Business Model. NAKD seems to be one of those companies that jumps on the bandwagon whenever it rolls by. At one point, the company sold tea, then clothing, then it jumped into cryptocurrency, and more. You get the point. There is no proven business model here that suggests the stock will make it big any time soon.
- Lack of Profitability. While Naked Brands Group has jumped around a bit, and generated revenue in the process, it has never been able to turn a profit. So, when money in the bank runs dry, it will have to do what it has done plenty of in the past, a dilutive stock offering that robs existing shareholders of their value.
- Short for a Reason. Ultimately, the short interest on NAKD, like is the case in most cases, is for good reason. There are serious concerns about the company’s business model and whether or not it will ever reach profitability. As such, short interest is heavy.
Short squeezes are fun. They can lead to tremendous profits for those that take part in them too. However, when it comes to NAKD, we’re talking about a company that may represent a good trade, but doesn’t necessarily represent a good investment.
So, if you’re going to play this run, make sure to watch it closely and be ready to sell your NAKD shares when the time is right!