Why Is Revlon (REV) Stock Plunging Today?

  • Revlon (REV) stock investors are not happy with today’s recent ruling, which has REV down about 12% on Wednesday.
  • Judge David Jones declined the formation of an equity committee for its shareholders, something shareholders were strong pulling for.
  • The company, along with its junior creditors and senior lenders were also opposed to the formation of an equity committee, arguing there was enough value to recoup.
REV stock - Why Is Revlon (REV) Stock Plunging Today?

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Shares of Revlon (NYSE:REV) are not faring well on Wednesday, with shares down about 12% in the session. At today’s low, REV stock was down 19.9%, and for the week, it’s still down about 21%. In short, it’s been a tough ride. While the stock has been behaving better lately, investors were hoping for better news.

REV stock trading was briefly halted earlier in the day following a ruling from Judge David S. Jones. Ahead of the company’s bankruptcy hearing, the judge declined the formation of an equity committee for its shareholders. That ruling comes after shareholders asked the judge to appoint an official equity committee earlier this month. They argued that no one else could be trusted to “speak up” for minority shareholders.

However, the company opposed that stance, arguing, “that the company’s $3.5 billion debt load meant that shareholders would likely receive nothing from the company’s bankruptcy, so a committee’s ‘significant’ costs would greatly outweigh any speculative benefit.”

For what it’s worth, the company’s junior creditors and senior lenders did not support the formation of the committee either.

Revlon filed for Chapter 11 bankruptcy protection in June, claiming that it was unable to make its payments on time due to the company’s $3.5 billion in debt. With a current market capitalization of ~$365 million, this debt load is clearly unsustainable.

What’s Next for REV Stock

Although riddled with volatility, REV stock has been trading much better. Shareholders were making the case that the stock price indicated long-term potential and opportunity. However, senior lenders argued that the stock price was “untethered from market realities.”

For what it’s worth, REV stock is still up over 500% from its 52-week low of $1.08. That’s even after today’s decline. That low was hit on June 13 and at one point, shares had rallied almost 1,000% off the lows.

There has been a lot of speculation in the market lately. That’s as shares of Bed Bath & Beyond (NASDAQ:BBBY), Blue Apron (NYSE:APRN), AMC Entertainment (NYSE:AMC) and others alternate between surging and plunging.

With REV stock still up more than 500% from its second-quarter low, it’s clearly got some momentum. At the same time, the company is proceeding through the bankruptcy process and that rarely acts as a positive catalyst.

Further, there are concerns that the equity is worthless, while Revlon’s unsecured bonds recently traded as low as 10 cents on the dollar.

On the date of publication, Bret Kenwell did not have (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.

Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell.


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