Revlon stock surges more than 50% since bankruptcy filing

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Revlon stock surges more than 50% since bankruptcy filing

Shares of Revlon Inc. continued their recent rocket ride Wednesday, as the bankruptcy of the cosmetics and hair-care company appeared to fuel a meme like buying frenzy among retail investors.

After Revlon said it had filed for bankruptcy on June 16, the stock fell 13.3% to close at $1.95, but that was 66.7% higher than the June 13 record close of $1.17.

In the afternoon, the stock REV went up 47.9%. It has now gone up 359% since the day it filed for bankruptcy, and is 666% higher off its June 13 record-low close.

With Revlon s short interest in the shares, analysts at Vanda Research said that 37.6% of the shares available for trading by the public or free float increased last week. Vanda said that the newest meme stock was a perfect candidate for the most speculative retail crowd.

A spike in the social boards chatter and OTM out-of-the-money call option volumes has confirmed that retail crowds are behind the latest moves higher, Vanda analysts wrote in a weekly note to clients.

Short interest in AMC Entertainment Holdings Inc. is 21.3% of the public float and in GameStop Corp. GME is 24.6% of the public float.

Vanda says the recent action in Revlon's stock is similar to when Hertz Global Holdings Inc. filed for bankruptcy in May 2020. The car rental company's stock had plummeted leading up to and on the day after the bankruptcy filing, then started surging the next day and recovered everything it lost in the post-bankruptcy selloff in just a couple of weeks.

Revlon said in its bankruptcy filing that it expects to receive $575 million in debtor-in- possession DIP financing from its existing lender base, so it can continue to run its business as a result of the constraints on its capital structure.

The company said in its quarterly filing in May that it had recorded a first-quarter net loss of $63.1 million on $479.6 million in sales, and had $3.31 billion in long-term debt as of March 31.

Consumer demand for our products remains strong and consumers love our brands, and we continue to have a healthy market position, Chief Executive Debra Perelman said in the bankruptcy filing. Our challenging capital structure has limited our ability to navigate macroeconomic issues in order to meet this demand. As debtholders receive priority in payouts over equity investors, investors should keep in mind that the company's stock can lose most of its value in a bankruptcy. The stock will be delisted and will likely start trading over the OTC under a new ticker.

It is important to understand that buying common stock of companies in Chapter 11 bankruptcy can lead to financial loss, according to the Financial Industry Regulatory Authority, or FINRA.

When a public company emerges from bankruptcy, the old shares are often canceled, and only the reorganized company s new shares have value.

Revlon's stock has dropped 21.0% year to date, while the S&P 500 index SPX has dropped 20.4%.