Reddit crowd climbs aboard Bendon-owner Naked Brand Group

Naked Brand recently announced it was selling its Bendon subsidiary to focus on profit-making e-commerce business. Photo / Supplied

Auckland-based underwear firm Naked Brand Group, owner of lingerie chain Bendon, saw its share price triple at one point this week as the Reddit-driven mania for penny stocks sought new targets.

Retail investors, organised under the r/WallStreetBets subreddit group, have been taking positions in companies targeted by short-sellers, sending the stocks rocketing higher and causing losses for hedge funds that had bet against them.

Naked, which had been at risk of being delisted from the Nasdaq Exchange for being unable to maintain a dollar share price, saw its share price push toward the $US3 mark Wednesday before easing back later in the week.

The stock closed Thursday at $1.38, up from 40c a week ago.

As the trading frenzy gained international headlines, online trading platforms Robinhood and Interactive Brokers restricted users' trading in stocks seeing the most action.

Naked Brand recently announced it was selling its Bendon subsidiary to focus on profit-making e-commerce business.

Bendon was once majority-owned by embattled businessman Eric Watson before its backdoor listing after a reverse merger with Naked in 2017.

One of Watson's companies in liquidation – Cullen Inc Holdings – owned 2.9 million Naked shares as at April 2019, according to Nasdaq filings.

And according to a court judgment in his long-running legal case with Sir Owen Glenn, a large number of shares in Naked ended up with a number of Watson's associates, including SBL Holdings, a company owned by Kiwi ex-pat businessman Tim Connell.

SEC filings show SBL at one stage held 853 686 shares. It is unclear what interest SBL has now after a recent settlement that resulted in SBL being issued a new class of redeemable conversion shares in Naked.

Ivory Castle Limited, an entity controlled by Watson's former right-hand man William Gibson, also owned Naked shares, as did Jake Millar, founder of Unlimited and good friend of Watson's son Sam.

At the height of this week's heightened day trading, Naked announced on Thursday it would issue 29.42 million shares at $1.70 each for total proceeds of about $US50 million.

Naked has had a torrid time since taking on Bendon.

Last May the company reported an after-tax loss of US$54.3m (NZ$88m) for the year to January 31, 2020 on revenue of US$90m, down from US$112m the previous year.

The company reported a working capital deficit of US$22m and negative shareholders' equity of US$6.3m. Total borrowings at balance date amounted to US$88m.

Naked did raise at least NZ$34m from share issues and convertible notes to assist with cashflow and repay debt while relying on wage subsides and bank support to keep Bendon afloat in New Zealand and Australia.