Revlon (NYSE:REV) made headlines last week after the cosmetics company reported a bankruptcy filing. This week, REV stock is surging by impressive margins on rumors that Revlon has a potential buyer. A multinational holding company allegedly has its eyes on the cosmetics retailer. Investors are watching the stock skyrocket in anticipation.
What’s Happening With REV Stock
Last week, InvestorPlace contributor Larry Ramer attempted to answer the question of what comes next for Revlon after it filed for bankruptcy.
Most experts were not expecting the answer. Bankrupt companies don’t usually see their stock surge, but that is exactly what REV stock did. It shot up an astounding 100% following the grim announcement. Although the gains ultimately cooled off, REV still closed up 50% for the day.
Today the stock is displaying similar growth. As soon as markets opened today, REV began to rise. As of this writing, it is up more than 65% for the day and shows no signs of slowing down. It began the day trading at less than $4 per share, but it currently trades at more than $6.
Is it just the potential buyout driving this surge? Let’s take a closer look.
Two Driving Forces
First things first. The potential buyer for Revlon is Reliance Industries, an India-based conglomerate with holdings across many sectors. But as Bloomberg reports, it is still only considering the acquisition. The deal is not finalized, and investors certainly shouldn’t be celebrating just yet.
That said, the buyout rumors have helped REV stock in a very important way. It has spiked retail investor interest. Retail investors elevating bankrupt companies became a trend last week as both REV and Electric Last Mile Solutions (NASDAQ:ELMS) saw significant gains after announcing bankruptcy. But now that Revlon may be looking at a rescue, the investors who bet on it last week have legitimate cause to keep driving it upward. If Reliance does indeed purchase Revlon, the cosmetics firm’s operations will continue. Additionally, some of the company’s excessive debt problems could be resolved, allowing Revlon to start growing again.
Debt problems are not Revlon’s only economic headwind. The company has also been facing mounting competition and supply chain constraints following the losses it endured during the Covid-19 pandemic. But if Reliance does buy it out, it will at least have the option to continue and restructure.
The Bottom Line on REV Stock
Investors are anxiously waiting for further updates on the potential buyout. But while they do, REV stock is a tempting play. Its heavy trading volume is likely to continue as interest in the company mounts. Retail traders have proven determined to keep their investment in the spotlight until there is an actual catalyst to report. Other investors are likely to keep buying in order to profit from the deal, should it go through.
As of now, the odds of the deal going through look good. ET reports that Reliance has big plans for its holdings in the cosmetics sector. And Revlon’s current status as a bankrupt — but former leading — beauty brand likely makes it a very tempting buy.
On the date of publication, Samuel O’Brient did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
