After hitting $1.95 in trading last week, Revlon’s stock price surged to close at $8.14 on Wednesday. This comes after an announcement the company has filed for Chapter 11 bankruptcy. Here are the reasons behind this stock's recent surge.
Revlon filed for Chapter 11 bankruptcy last week under the weight of $3.3 billion in debt
After hitting $1.95 in trading last week, Revlon’s stock price has surged to close at $8.14 on Wednesday This year has been savage for Revlon's stock price. At the beginning of the year, Revlon was trading at $11.66 a share but has since tumbled to $1.95 after their bankruptcy announcement. Since then, the price has surged and closed up another 34.32% to $8.14 on Wednesday 22nd June.for access to AI-powered investment strategies. When you deposit $100, we’ll add an additional $50 to your account.Revlon is an OG in the cosmetics game.
The global lockdowns didn't help either. Vastly reduced opportunities to leave the house meant less demand for makeup, and this has persisted somewhat in a post-Covid world where working from home has become much more mainstream.While all of this has had an impact, Revlon's biggest problem is debt. They're drowning in it. This is a company with over $3.3 billion in debt and a market cap of just over $400 million, even after the recent price rise.
Whenever a company declares bankruptcy, a big line forms of people and organizations who want their money back. Where you stand in that line depends on what type of creditor you are. Unpaid wages, for example, are considered priority claims, so they get paid before any other debts can be cleared. Why is a buyout so attractive? We've already established that Revlon shareholders are playing a risky game. Should the company restructure into a new entity, they'll almost certainly be left with nothing.On the other hand, another company may decide to step in to buy Revlon. This would mean taking over the business, absorbing the debt and paying out existing shareholders.
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