Superdry (LON: SDRY) share price has become highly volatile in the past few weeks. This volatility has been accompanied by strong volume as investors assess its future. The stock plunged to a record low of 14.92p last month and has now soared to 44.65p. This makes it one of the most remarkable recoveries in the UK recently.
Why is the stock swinging?
Superdry shares have surged in a high-volume environment. Data published by Hargreaves Lansdown (LON:HRGV) shows that more than 1 million shares have been traded in the past eight straight days. The volume reached a peak of over 31 million on Friday last week.
Still, it is worth noting that the stock has been in a downtrend for a long time. It remains about 97% below its highest point in 2018. This drop has led to a strong destruction of value as its market cap has dropped to just £43 million. At its peak, Superdry was a retail juggernaut worth over £1.8 billion.
Superdry’s collapse has happened at a time when UK retailers are facing major competition and when its losses have risen. It is facing competition from the likes of Temu and Shein. The most recent results published in January showed that its revenue tumbled to £219 million in the first half of the year.
The company’s net working capital retreated to £77.8 million while its adjusted loss for the period almost doubled to £25.3 million. These results, and the accompanying weak guidance means that the company will likely continue struggling in the coming months.
Therefore, Superdry share price has popped after rumours spread that the company’s founder was considering taking it private. The idea is that Julian Dunkerton can work to turn around the company privately and then possibly take it public later.
It is still not clear whether he will move on with the deal and whether he has enough financing. A likely scenario is where he works with other players like private equity companies to take it private. Besides, some analysts believe that Superdry is still a valuable brand that can work well during a turnaround process.
What next for Superdry share price?
SDRY chart by TradingView
It is hard to predict where the SDRY stock price will be in the near term because of the external factors facing the company. Taken together, the stock’s movement will depend on whether the company will be taken private. If this happens, there is a likelihood that the shares will continue rising.
The biggest risk is where the company continues as a publicly traded company. If this happens, there is a likelihood that the shares will resume the downward trend and possibly move below 25p.