Retail investors rushed into Revlon Inc again on Tuesday as a stronger appetite for risky assets led to a more than 30-fold increase in trading for the bankrupt cosmetics giant.
Revlon, which filed for court protection on June 15, rose 62% in New York, with more than 183 million shares traded. This is more than 31 times the average volume of the last three months. Since the company fell to an all-time low on June 13, the stock has jumped 461% as around 538 million shares have changed hands.
Retail traders were behind some of those gains, amid a 2.5% lead on the S&P 500 index. In a move reminiscent of other low-priced company bets and leveraged companies, such as Hertz Global Holdings Inc. and AMC Entertainment Holdings Inc., individual investors are turning their attention to stocks in hopes of a quick profit while ignoring fundamentals.
Common stockholders have some of the weakest claims on a company’s assets in bankruptcy court, lining up behind lenders, bondholders and other creditors who typically must be fully repaid before stockholders get anything whether it be. Procedures often leave shares worthless.
Revlon was among the 10 most traded assets on Fidelity’s platform on Tuesday, with buy orders almost matching sells. The stock has attracted around $10 million in cash from retail traders over the past week, with nearly $6 million flowing into the business on Friday alone, according to data from Vanda Research.
Read/Listen: Revlon Is Losing Its Shine Amid Crushing Supply Chain and Debt Issues
On Friday, Revlon won approval from a US bankruptcy judge to tap $375 million in new financing on an interim basis. The company will seek permission to borrow more money at a later hearing.
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