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Is a Reverse Stock Split in the Offing for Naked Brand Group Limited [NAKD]?

Naked Brand Group Limited [NASDAQ:NAKD] was a top performer yesterday and closed the day with gains of 29%.

This saw it form a bullish reversal pattern, an indicator that it could be primed for more gains short-term as investors take advantage of the positive price action. Interestingly, this is happening at a time when the stock does not have any big positive news about it.

In fact, recent news show that the company has been losing value an indication that the company’s undergarments business has not been resonating with the youth, especially millennials. Testament to this is the company’s loss of 95% of its value year-to-date. So, why is the stock gaining upside momentum despite a weakening value proposition? Well, this has a lot to do with market expectations. .

One of them is the expectation of a stock split. If the stock is to keep trading on the NASDAQ, it would most likely have to do a reverse stock split. One of the requirements for maintaining listing on the NASDAQ is for a stock to trade above $1 for at least 20 trading days.

The stock has been trading at this price level for quite some time. Though it has not received a notification for the same, there is a good chance that it will hence the need to shore up the price. One way that companies in that situation do it is through a reverse stock split.

This could see the number of investors buying into this stock increase in anticipation of a rally triggered by a stock split. This could see the stock keep gaining in value in the foreseeable future and trigger a bull run in case the reverse stock split becomes a reality. This makes it a high potential stock to watch in the near-term. 

Besides the possibility of a stock-split, this stock is likely to be drive by the fact it is trading at a key support level. After losing 95% of its value-to-date, the stock could be trading at a price level where it could be trading at a point of maximum pain, with minimal possibility for more losses. As such, traders looking for a low risk, high return trade could take an interest in this stock short-term.

About Naked Brand Group Limited 

Naked Brand Group Limited is a designer, and distributor of intimate apparel for men and women. The company is based in Auckland, New Zealand. 

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