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Centro electric group (NASDAQ:NNEC) stock represents one of the strangest stories out of the stock market in recent years.

Source: Centro Automotive

It was acquired by Naked Brand Group, which is a swimwear and intimate apparel retailer. Naked Brand Group had one of the most interesting stories in 2021. It was a very lucky company in that it grabbed Reddit fervor and fled. This is where the interesting story begins.

Capitalize on Wild Times

Naked Brand Group is a company that would not have caught the attention of investors at any other time. However, the start of 2021 has been tumultuous. In the end, it helped the company tremendously. This is because Naked Brand Group has announced that it will divest its brick and mortar business on January 21, 2021. Redditors seized on this news for some reason. This caused NAKD’s stock prices to skyrocket and the company immediately issued 29.415 million shares stock worth the company nearly $47 million.

He then raised additional capital from accredited investors. And that was the narrative behind Naked Brand Group: it shrewdly used retail investors to get out of a delisting and raise a bunch of capital.

Early indications were that he would use the earnings to expand his e-commerce channels and turn around his fortunes. But it didn’t do that.

Electric vehicle pivot

Naked Brand Group used these profits to completely change the course of its business. And in a very strange way. It acquired the private company Centro Automotive Group Limited and changed its brand name to Cenntro Electric Group Limited on 31 December.

It was completely unexpected and unpredictable. All of Naked Brand Group’s former retail assets were divested and the business suddenly became electric vehicle (EV) player. The company has pledged to produce 20,000 vehicles in 2022. That said, the company has only produced 3,600 vehicles since 2013.

This turns out to be one of many red flags regarding the CENN stock.

Troubled, but bold

Remember, Cenntro Electric Group said it was committed to producing 20,000 vehicles in 2022. If he succeeds, it would be a miracle. The company produced 1,623 vehicles in 2021.

Investors will find it hard to believe that the company will suddenly be able to produce more than 10 times more vehicles thanks to the acquisition of Naked Brand Group. Yes, this is a very strange pivot, as anyone trying to understand CENN stock has noted.

In my mind, Cenntro Electric Group is one of many companies that suddenly ran out of cash in the past year. It sounds attractive, but investors need to ask themselves a question: will the company be able to turn this into something more valuable?

Niche electric vehicles

Cenntro Electric Group produces commercial electric vehicles. In the case of Cenntro, sales come mainly from its metro vehicle. The company has produced 3,300 to date.

It’s hard to imagine that investors would be very interested in Cenntro’s offerings. It serves a fairly small market with very limited sales to date.

What to do with CENN actions

There’s no cohesive strategy behind Naked Brand Group’s foray into electric vehicles. The decision leaves more questions than answers. I don’t know why management chose to make the decision they did. I think most investors instinctively back off when companies pivot in ways that are hard to understand.

I would just suggest that there is little chance that Cenntro will take their money and manage to turn it into a bigger sum. It’s a very simple way to understand its mission as a company. But it does suggest value destruction, something no one should invest in. The history of Naked Brand Group was very interesting before it became associated with electric vehicles. Now, that’s a weird story that’s hard to understand.

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At the date of publication, Alex Sirois did not hold (neither directly nor indirectly) any position in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to Publication guidelines.

Alex Sirois is an Independent InvestorPlace Contributor whose personal equity investing style focuses on long-term, buy-and-hold stock picks that create wealth. Having worked in multiple industries, from e-commerce to translation to education and using his MBA from George Washington University, he brings a diverse set of skills through which he filters his writing.

The post office Cenntro Electric is a real headache of a business case appeared first on InvestorPlace.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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