The Fascinating Journey of Centro Electric: From Lingerie Sales to Electric Vehicle Manufacturing
Introduction
Away from the market’s relentless spotlight on the biggest stocks, you can find some of the most intriguing tales of corporate machinations. One such fascinating story is that of Centro Electric, a Chinese maker of small electric trucks. While it may not be worrying the likes of Tesla with its market value of about $85 million and sales of just 458 vehicles last year, its corporate history has been eventful if nothing else.
The Rise during the Meme Stock Craze
During the meme stock craze of 2021, Centro Electric, then known as Naked Brand Group (NBG), found favor among retail punters as a lingerie salesman. Similar to other standard-bearers of the meme stock madness like retailer GameStop and movie theater chain AMC, NBG had a familiar brand but a struggling business. It sold lingerie online under the Fredericks of Hollywood label and owned the well-known Antipodean underwear name Bendon. The shares of NBG soared 759% under the NAKD stock symbol in January 2021, as its social media promoters quickly dubbed themselves the Naked Army.
However, the journey for NBG and its shareholders took a different turn from that of its executive chairman, Justin Davis-Rice. While NBG’s stock price fell sharply, Davis-Rice was still able to use his fame to raise over $200 million for the company by selling shares over the next several months. Meanwhile, NBG completed the sale of the Bendon brand to Davis-Rice and former chief executive Anna Johnson for NZ$1. The stage was set for a new chapter in the company’s history.
A New Chapter: The Acquisition by Centro Electric
In November, NBG underwent an acquisition by Centro Electric, which took over the listing and control of the company. In exchange for about 70% of NBG in newly issued stock, Centro Electric spun its fledgling EV maker into NBG and inherited $280 million in cash. At the same time, the Fredericks bra business was sold to Davis-Rice and Johnson for A$1.
The founder of Centro Electric, Peter Wang, hailed the acquisition as a way to attract Naked Army and other loyal shareholders that “no IPO could achieve.” To reflect the new phase of the company, Centro changed its stock ticker to CENN and forecasted revenue of $25 million for 2021, along with projected vehicle sales of 21,500 for 2022.
A Tale of Disparity: Shareholder Woes and Executive Rewards
While Davis-Rice enjoyed significant rewards in recent years, long-time shareholders of NBG since the height of the meme stock craze had a different experience. The company’s stock fell more than 90% since the closing of the deal with Centro Electric, and its operating performance fell well below target. Even in the recently released data for 2022, sales fell short of $9 million, and the cash pile dwindled to $154 million.
The disparity in shareholder and management rewards could raise questions or even give rise to activist campaigns in larger companies. However, in small companies like NBG, there is often less control and oversight. Governance becomes a critical factor when the stock is making new highs and attracting attention. Adam Epstein of Third Creek Advisors, who works with small-cap boards, mentions that governance tends to receive even less attention when there is little coverage to begin with.
Unique Insights and Perspectives
The journey of Centro Electric, formerly Naked Brand Group, provides valuable lessons and insights into the intricacies of corporate maneuvering and the impact on shareholders. While the meme stock craze brought attention and momentary fame, it also exposed the challenges faced by companies with struggling business models. Some unique insights and perspectives on this topic include:
1. The Power of Social Media and Retail Punters
The meme stock craze highlighted the influence of social media and the collective power of retail investors. Companies like NBG captured the attention of online communities, leading to significant volatility in their stock prices. Retail punters became a force to be reckoned with, challenging the traditional dynamics of stock market movements.
2. The Perils of Speculation
The rise and fall of NBG’s stock price illustrate the perils of speculative trading. While the initial surge may have provided fleeting gains for some investors, the subsequent decline eroded much of their investment value. This serves as a cautionary tale for those tempted by quick profits in highly volatile markets.
3. The Role of Executive Leadership
The actions and decisions of executives can significantly impact the trajectory of a company. Davis-Rice’s ability to raise capital through share sales demonstrates the power of executive influence, even in the face of declining stock prices. The disparities in executive rewards and shareholder outcomes raise questions about governance and accountability.
4. Navigating the Transition from Lingerie Sales to Electric Vehicle Manufacturing
The journey from lingerie sales to electric vehicle manufacturing is an unusual one. Centro Electric’s acquisition of NBG marked a strategic shift towards sustainable transportation. This transition presents challenges and opportunities for the company as it aims to establish itself in a competitive market while navigating the complexities of the EV industry.
Conclusion
The transformation of Centro Electric, formerly Naked Brand Group, from a struggling lingeries salesman to an electric vehicle manufacturer is a captivating tale of corporate evolution. The rise and fall during the meme stock craze, the disparities in shareholder and management rewards, and the challenges faced by small companies all contribute to a deeper understanding of the intricacies of the stock market and corporate dynamics.
As the market continues to evolve and new trends emerge, companies like Centro Electric serve as reminders of the importance of robust governance, ethical leadership, and strategic decision-making in ensuring the long-term success and sustainability of businesses.
Overall, the journey of Centro Electric offers valuable insights for investors, entrepreneurs, and enthusiasts alike, highlighting both the opportunities and risks associated with investing in small-cap stocks and navigating the ever-changing landscape of the corporate world.
jennifer.hughes@ft.com
Summary:
Centro Electric, formerly known as Naked Brand Group, experienced a fascinating journey from selling lingerie to becoming an electric vehicle manufacturer. During the meme stock craze, the company saw a surge in its stock price, attracting retail punters and social media attention. However, while the executive chairman successfully raised capital, the stock price declined sharply, leading to disparities in shareholder and management rewards. The subsequent acquisition by Centro Electric and its new phase as an EV maker brought both challenges and opportunities. The story of Centro Electric provides unique insights into corporate maneuvering, governance issues, and the complexities of transitioning to a new industry.
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Away from the market’s relentless spotlight on the biggest stocks, you can find some of the most intriguing tales of corporate machinations. Bring bras to the path of cars from Nasdaq-listed Centro Electric.
With a market value of about $85 million and sales of just 458 vehicles last year, the Chinese maker of small electric trucks isn’t worrying the likes of Tesla. But its corporate history has been eventful if nothing else.
Briefly during the meme stock craze of 2021 and an earlier incarnation, it found favor among retail punters as a lingerie salesman Naked Brand Group.
Like other standard-bearers of the meme stock madness like retailer GameStop and movie theater chain AMC, it had a familiar brand but a struggling business: in this case, it sold lingerie online under the Fredericks of Hollywood label, as well as owning the stalwart Antipodean underwear Bendon, once fronted by supermodel Elle Macpherson and later by Heidi Klum.
In January 2021, its shares soared 759% under the NAKD stock symbol. Its social media promoters were quick to dub themselves the Naked Army. From there, though, shareholder and management rewards began to diverge.
NBG’s stock price fell sharply, but executive chairman Justin Davis-Rice was still able to use his fame to raise over $200 million for the company by selling shares over the next several months.
Around the same time, however, NBG was completing the sale of the Bendon brand to Davis-Rice and former chief executive Anna Johnson for NZ$1. Following the sale and raising capital, Davis-Rice spoke in the April 2021 of the strength of NBG’s outstanding $270 million stack and sought deals that “could position Naked as a strong player in intimate apparel.”
In November, however, the deal that materialized was an acquisition by Centro, which took over the listing and control of the company. For about 70% of NBG in newly issued stock, Centro spun its fledgling EV maker into NBG and inherited $280 million in cash. At the same time, he sold the Fredericks bra business to Davis-Rice and Johnson for A$1.
Centro founder Peter Wang said getting Naked Army and other loyal shareholders “was something no IPO could achieve.” He changed his stock ticker to CENN and forecast revenue of $25 million for 2021 plus vehicle sales of 21,500 for 2022.
But the shareholders who stayed in the NBG days had a bad experience. The company’s stock has fallen more than 90% since the closing of the deal, and its operating performance has been well below target. Even in 2022 data just released this week, sales fell short of $9 million and its cash pile fell to $154 million.
Asked for comment, Centro pointed to “the unprecedented and extreme global challenges both industry and management faced in 2022.” These issues would have hit a company manufacturing in Covid-isolated China particularly hard.
But in April this year, outgoing auditor Marcum Asia expressed concern about Centro’s previously bullish forecast. He said he was aware of “questions relating to the company’s anticipated financial background” that could have caused problems for her as auditor, but that her dismissal meant he had not investigated.
In contrast to the plight of longtime shareholders since the height of the meme stock craze, Davis-Rice has enjoyed significant rewards in recent years. In 2021, the board gave him a phantom warrant, a form of compensation in which the amount earned tracks stock movements, but is paid in cash.
If all of NBG’s ghost payments had gone to Davis-Rice, it would have netted him about $36.7 million. According to Bloomberg data on the chief executive’s latest salary, that would put him just outside the top 100 currently best-paid of any U.S. publicly traded company, even though he led a company that had lost $84 million in the two financial years. previous.
There is also the sale of the two units to Davis-Rice and Johnson for less than $2. Those deals came with liabilities written off and debts forgiven totaling $70 million, according to various documents from Centro and Bendon. Their restored balance sheets helped improve their performance. Bendon, Davis-Rice and Johnson did not respond to requests for comment.
Such disparities in shareholder and management rewards could attract questions or even activist campaigns at big companies. In small companies, there is less control.
“In a very American sense, we follow the money and the bigger companies dominate in terms of performance and attention,” said Adam Epstein, of Third Creek Advisors, who works with small-cap boards. “Nobody is focused on governance when a stock is making new highs, but there’s even less attention when there’s very little coverage to begin with.”
Last month in a Telegram chat forum, a user posted “NAKD taught us patience…CENN taught us HODL! [Hold On For Dear Life]”. In January, another user vowed if Cenntro’s stock reached $500 to get a tattoo that included both names. Shares currently trade at around 37 cents. It’s nice to have dreams, but a little more control could help them come true.
jennifer.hughes@ft.com
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