Revlon Goes on a Massive Rally After Bankruptcy Filing – The Average Joe
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    Revlon Goes on a Massive Rally After Bankruptcy Filing


    June 22, 2022

    Cosmetics retailer Revlon has been trading like a meme stock in the past week, but retail investors aren’t at the center of the move this time.

    On June 10, news broke that Revlon (NYSE:REV) was about to file for bankruptcy — sending its stock down over 70%. Now, it’s trading up over 600% from its June 13 low…

    What’s the big deal? Revlon’s price moves look similar to Hertz (NASDAQ:HTZ) last year — whose stock also went through a roller coaster ride after filing for bankruptcy.

    In 2020, Hertz filed for bankruptcy, and retail investors drove up its stock in the following weeks — but gains were quickly erased. This time, Vanda Research data shows retail investors were only a tiny portion of Revlon’s trading volume.

    • Under Chapter 11 bankruptcy, the company can continue to operate while it figures out a way forward.
    • Last Friday, it was reported that Reliance Industries was considering buying Revlon — which sent its stock soaring.

    How did Revlon get here? Too much debt, a slowing economy and an outdated marketing strategy. In 2016, Revlon took on $2B in debt to buy competitor Elizabeth Arden — bringing its debt load over $3.7B.

    Then COVID hit all beauty companies hard — but Revlon even more.

    • Competitors took advantage of social media-fueled growth in cosmetics products — while Revlon kept to its old celebrity endorsement strategies.
    • Sales of beauty company Ulta (NASDAQ:ULTA) have far surpassed their pre-COVID levels, while Revlon is still struggling to recover.

    Bankruptcies incoming: As of June 17, only 15 companies filed for bankruptcy in 2022 — compared to 66 during the same period in pandemic 2020 (Barron’s). But bankruptcies may only be getting started as markets are pricing in more defaults.

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