Sitting pretty? Revlon stock surges after bankruptcy filing

Actions of Revlon (REV) it soared almost 35% on Wednesday afternoon in volatile trading. The shares are now up more than 300% in the last three sessions, from around $2 to around $8, after falling 13% on the day the company announced its Chapter 11 reorganization plan. (Speaking of putting pencil lipstick on a pig…)

Revlon’s stock surge is eerily reminiscent of what happened to the car rental company. hertz (CNTB) in 2020 after filing for bankruptcy. Shares initially soared thanks in part to positive mentions from traders on Reddit, who were betting against short sellers who thought Hertz shares would continue to fall.

When a company goes bankrupt, most investors typically get nothing from the subsequent reorganization. Bondholders and other creditors are often first in line to get some of their money back, but the holders of the shares usually lose their investments once new shares are issued after bankruptcy.

Which makes Revlon’s rise even more peculiar. Some posters on the popular Reddit board WallStreetBets even speculated on how much higher Revlon shares could go.

A Reddit user named pikatruuu (sort of after the yellow Pokemon character) noted the Hertz comparison, saying the rental car giant’s stock rose eightfold during its bankruptcy proceedings.

“Revlon is currently the 11th shortest stock… It’s quite an iconic brand. Is there a chance it could become a meme stock?” pikatruuu wrote. On the other hand, pikatruuu also pointed out that what happened with Hertz “is a rare occasion, of course”.

That hasn’t stopped some extremely enthusiastic users from boosting the outlook for the stock.

“Is Revlon the Gamestop of 2022?” asked Wonderwoman009.

“I have no idea. But the party is happening now,” replied pikartruuu, adding that “if this [subreddit] can get on the train, I don’t see why it doesn’t go over $10.

Others were even more upbeat, expressing their love of stocks with posts in ALL CAPS.

“REVLON TO THE MOON IS GOING TO $12,” said a user named One-Relationship-143.

But there seemed to be at least one voice of reason talking about Revlon on Reddit.

“If you had money, you were going to burn yourself out doing something,” Electronic-Ad6420 wrote, “then yes, you should buy something.”