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Naked Brands (NASDAQ:NAKD), which has been known for selling high-end lingerie, has outdone itself. The company is going green. Pending shareholder approval at a special meeting on Dec. 21, Naked Brands will merge with Cenntro Automotic Group, an electric vehicle (EV) technology firm. The new company will go forward under the Cenntro name, albeit with the NAKD stock symbol.

Upon finalization, Naked Brands will cease to exist. Under the terms of the merger, Naked shareholders will receive seven shares in the new entity for every three existing NAKD shares they own. The combined company will have a market capitalization of nearly $2 billion.  

As David Moadel pointed out, this isn't an evolution; it's a transformation. And while the company hasn't indicated it will be getting out of its legacy business, that would seem to be the likely path. 

I have no idea what this means for the future of the company. However, this may be a case where it's trading one uncertain future with a business model that was dying for an uncertain future with a company that CEO Justin Davis-Rice describes as a "disruptive opportunity in the clean technology sector." 

Is The NAKD Stock Merger the New Normal? 

As the company puts it, this transformation has been in the works for some time. Perhaps retail investors had picked up the scent and have been holding on to their shares waiting for the announcement.  

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The somewhat surprising part of this transaction is the apparent ease with which the company is moving on. In fact, Davis-Rice alludes to such when he describes himself as "an owner and operator of many diverse businesses."

He elaborated, saying he was always "attracted to commercial opportunities that benefit our environment and help contribute to the growing ESG mandates that major corporations are implementing today across the globe." 

However, the more interesting story to me is how retail investors helped to fund this transaction. The large increase in the company's stock was used to turn Naked Brands into, essentially, a special purpose acquisition company (SPAC). And that may become part of a bigger story — and perhaps a cautionary tale to be learned.  

Where Have I Seen This Before? 

One of the first things I thought about regarding Naked Brands' pivot to the EV sector was a similar merger. Earlier this year, Support.com merged with Greenidge Generation Holdings (NASDAQ:GREE), a vertically-integrated Bitcoin mining and power generation company. That was also a move that lacked any obvious synergies.  

In fairness, this isn't an apples-to-apples comparison. So while investors in SPRT stock may be underwhelmed by the short-term performance of GREE stock, that might not be the case for NAKD shareholders. It's too soon to tell.

However, the initial response from investors has been a classic case of buying the rumor and selling the news. NAKD stock climbed 25% in the weeks leading up to the announcement. But since the company issued its press release on Nov. 9, the stock has given up all those gains. 

With that said, something had to give. NAKD stock was one of the original meme stocks to catch fire early in 2021. In the first month of this year, Naked Brands stock jumped about 750%. However, the company was not making moves that suggested its plan to become an e-commerce only business was going to be successful.  

But one move they did make was to use the inflated stock price to pay off debt. That was what held investor's attention. What were they going to do with that large pile of cash? Now we know. 

Is NAKD Stock a Buy?  

Cenntro is a startup that was privately held before this transaction. Investors will know more about the company's financials moving forward. But it does have more vehicles on the road than any competitor. And with 2021 revenue of $25.3 million that is projected to climb to $2.1 billion in 2023, there's reason for optimism.  

As Joel Baglole cautioned investors, the real key will be if the merger approval is sufficient to get NAKD stock over the $1 threshold. With the threat of delisting hanging over the company, only the most risk-tolerant investors will want to get involved. If the company's future is as bright as some hope, there will be time for others to jump in later.  

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On the date of publication, Chris Markoch did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.  

Chris Markoch is a freelance financial copywriter who has been covering the market for over five years. He has been writing for InvestorPlace since 2019. 

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