Just when investors had written Revlon (OTCMKTS:REVRQ) off again, the company has found a way to rise. REVRQ stock has been surging all day on news that it plans on restructuring. The cosmetics company declared bankruptcy earlier this year, catching the eye of meme stock traders. This led to a short squeeze that shocked markets as REV shares soared to impressive heights. Since then, it has switched to trading over the counter (OTC). Now the new REVRQ stock is rising following today’s restructuring update.
What’s Happening with REVRQ Stock
REVRQ soared by as much as 100% this afternoon, ultimately closing higher by 63%. This would make the restructuring update seem like excellent news for investors.
However, Bloomberg reports that it involves wiping out shareholders and transferring ownership to lenders. Per the outlet:
“The company entered a restructuring support agreement with a critical lender group and its official committee of unsecured creditors on Monday, filings show. The deal calls for doling out ownership stakes in Revlon to secured lenders, while mostly wiping out the company’s lowest-ranking creditors and leaving existing stockholders with nothing.”
According to Reuters, this deal would mean a $44 million payout for Revlon’s unsecured creditors, “who would otherwise be last in line for repayment of their debts.” The agreement is based on the assumption that Revlon will obtain the approval of the bankruptcy court for the deal’s completion. However, if a large-scale buyer emerges, Revlon will have the option to sell itself. A plan must be submitted by Revlon to a bankruptcy judge before this week is up. It’s hard to say if REVRQ stock will continue to rise or will fall again while the deal moves toward finalization.
Revlon is currently owned by MacAndrews & Forbes, the holding company of billionaire Ron Perelman, who so far has not commented on the pending deal. While the recent gains from REVRQ stock have been impressive, Revlon remains a highly unstable company.
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On the date of publication, Samuel O’Brient 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.
