Sitting pretty? Revlon stock surges after bankruptcy filing

Shares of Revlon (REV) soared nearly 40% Wednesday afternoon in volatile trading. The stock is now up more than 320% in just the past three sessions — from about $2 to above $8 — after falling 13% on the day the company announced its Chapter 11 reorganization plan. (Talk about putting lipstick on a pig … )

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

When a company declares bankruptcy, most investors typically don’t get anything from the ensuing reorganization. Bondholders and other creditors are often first in line to get back some of their money, but holders of the stock usually have their investments wiped out once new shares are issued post-bankruptcy.

Which makes the surge in Revlon all the more peculiar. Some posters on Reddit’s popular WallStreetBets board were even speculating about how much higher Revlon shares might go.

One Reddit user named pikatruuu (sorta like the yellow Pokemon character) noted the comparison to Hertz, saying that rental car giant’s shares surged eightfold during its bankruptcy process.

“Revlon is currently the 11th most shorted stock … It is a pretty iconic brand. Is there a chance it becomes a meme stock?” pikatruuu wrote. Then again, pikatruuu also pointed out that what happened with Hertz “is a rare occasion of course.”

That hasn’t stopped some extremely enthusiastic users from pumping the stock’s prospects.

“Is revlon the Gamestop of 2022?,” asked wonderwoman009.

“No idea. But the party is happening now,” pikartruuu responded, adding that “if this [subreddit] can hop on the train, I don’t see why it doesn’t go past $10.”

Others were even more bullish, expressing their love for the stock with posts in ALL CAPS.

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

But there appeared to be at least one voice of reason discussing Revlon on Reddit.

“If you had money you were just gonna burn for something to do,” wrote Electronic-Ad6420, “then yes, you should buy some.”