Are you familiar with GameStop (NYSE:GME), the American video game retailer?
In January 2021, a short squeeze of the stock took place, causing major financial disrupt and huge losses for hedge funds and short sellers. Simply explained, approximately 140 percent of GameStop’s public float had been sold short and when hedge funds and short sellers scrambled to buy more shares to cover their positions, the share price skyrocketed.
At its peak in late January, the short squeeze caused GME’s stock price to reach a pre-market value of over $500 USD per share, significantly differing to it’s $17 valuation at the start of the month.
The unusually high price and volatility has continued after the peak in late January. On February 24, the GameStop stock price doubled within a 90-minute period, and then averaged in the neighborhood of $200 per share for another month. On March 24, the GameStop stock price fell 34 percent to $120.34 per share after earnings were released and the company announced plans for issuing a new secondary stock offering. On March 25, the stock recovered dramatically, rising by 53 percent.
Between July and November of 2021, the GME price has fluctuated at around $200, which has still provided life changing gains in wealth for retail investors who got in at the right time.
But what caused the GameStop short squeeze?
The short squeeze was initially and primarily triggered by users of the subreddit, r/wallstreetbets, an internet forum now boasting more than 11 million members, or degenerates, although only having a few thousand members at the time. The group of online retail investors banded together, buying and holding the stock, increasing demand by slowly reducing the supply (public float availability). Eventually, a few hedge larger investors got on board and the rest is history.
GME’s historical short squeeze result is a testament to the power of small retail investors, and has inspired an investment movement.
The cryptocurrency, Shiba Inu (SHIB), was the next asset to experience astronomical price gains with credit largely being attributed to the reddit army.
Read more about the rise of Shiba Inu.
Following the success of wallstreetbets on reddit, numerous members began discussing the short squeeze potential of the Naked Brands Group stock, NYSE:NAKD.
Created in June 2018, Naked Brand Group (NBG) is a specialist digital intimate apparel and swimwear business focussed exclusively online. Designing, manufacturing and marketing the 74-year-old Frederick’s of Hollywood brand under a license agreement with Authentic Brands Group.
Trading at around 7 cents in November 2020, the NAKD stock price has steadily climbed to around $0.75 USD by November 2021.
In mid 2021, NAKD boasted holdings of over $270 million in cash, but on November 8, announced the acquisition of Cenntro Automotive Group, an early pioneer in Artificial Intelligent (AI) Autonomous Driving and a leading designer and manufacturer of electric light and medium-duty commercial vehicles (“ECV”).
With a Market Cap of around $642 million, NAKD is currently considered significantly undervalued. Considering multiple factors, including earnings potential, growth prospects and plans in motion, numerous professional valuations have concluded that NAKD stock is intrinsically worth greater than $50 a share.
While NAKD received considerable attention from the WallStreetBets subreddit group, most of this group’s members are now dedicated to the success of their new cryptocurrency, WallStreetBets DApp.
The transition from stocks to cryptocurrency for WallStreetBets birthed the subreddit group, r/NAKDstock, which has blossomed into a community of over 27,000 NAKD investors.
Most members of the NAKD Army have made promises to each other that they will not liquidate their holdings until the stock price exceeds $230. Do you believe NAKD will follow in the footsteps of GME?
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