Revlon (REV) ripe for short squeeze and big gains, buy now. via /r/wallstreetbets #stocks #wallstreetbets #investing

Revlon (REV) ripe for short squeeze and big gains, buy now.

So I'm not a licensed broker or any of that shit but I just thought I'd share some of my analysis on REV and why I think its about to spike. You have 30 mins to buy. Follow at your own risk.

Today Revlon reached a deal with its creditors allowing it to avoid bankruptcy. It has a Senior loan of ~$1B which becomes due on Feb 15. They also had ~$346M in notes which needed to be paid off or refinanced by Nov 15. As of Oct 30 they only had $350M cash on hand and would not likely have been able to pay off the notes. Missing repayment of the notes due on Nov 15 would have caused the Senior loan to accelerate and be due immediately. This would have forced Revlon into bankruptcy.

However, Revlon announced today that it reached a deal with 70% of its noteholders to payoff 70% of the debt for ~32.5 cents on every dollar (or a mix of cash at a discounted rate plus the issuance of new debt that matures later). The remaining 30% of the notes will be paid off at 100%. This means that Revlon will be paying ~$79M to discharge 70% of the notes and $104M for the remaining 30%. It's cash on hand will decrease by a total of ~$183M leaving it with ~$167M cash on hand. Enough for it to get by for the next few months while it works on restructuring its remaining $1B Senior loan facility which matures on Feb 15.

I expect that with (1) the easing of the Coronavirus headwinds and (2) a Biden presidency seeking a large stimulus package that Revlon will be able to restructure its remaining debt facilities (in addition to the $1B Senior loan facility they have another ~$2B in debt that they'll need to restructure at some point). Why? In light of the positive Corona vaccine news + expected stimulus, Revlon's lenders would likely rather delay repayment of their debt to have the chance to recover a larger percentage of their capital from Revlon after the economy recovers.

In addition to the above, Revlon is a low float stock (only ~10% of their stock is publicly traded), short interests are 50% of the traded stock and the Short Ratio is currently 14.01. This makes Revlon very ripe for a short squeeze. This means that it is highly likely that the stock price will breakout for a day or two (likely hitting ~$15-17) before consolidating around $12-14.

So what will the catalyst for the short squeeze be? Today's conference call/earnings release at 5pm ET. Likely to hear positive news based on recent events. However, I expect that Revlon will miss on earnings/revenue in Q3 and so there will be some headwinds to overcome before the stock blasts off and squeezes. The play today is to stop scalping Revlon and take a long position for a swing trade which you will exit tonight in afterhours, tomorrow, or early next week. Due to the low float, its possible that only a handful of investors (and small investors) could cause short sellers to panic. I recommend buying shares and calls today before the call in anticipation of the short squeeze that is likely.

As always, follow your own research and good luck.

Submitted November 12, 2020 at 09:50PM by Myztiqxx
via reddit