(Bloomberg) — Revlon Inc . told the judge overseeing the cosmetics giant’s bankruptcy that shareholders don’t need a special, company-funded committee to represent them in the Chapter 11 case because there’s no evidence the equity is worth anything.
Most Read by Bloomberg
The company urged U.S. Bankruptcy Judge David S. Jones in Manhattan to reject the minority owners’ request in part because low bond prices suggest the stock has little hope of a recovery. The company also argued that shareholder interests are already well represented in the case by majority owner MacAndrews & Forbes, as well as other groups
In bankruptcy, formal equity committees are rare because all creditors must be paid in full before shareholders are allowed to recover any of their investment.
The committee representing unsecured creditors also asked Jones to reject a shareholder committee.
“Revlon stock trades have all the outward appearance of so-called ‘meme’ stocks,” the commission said in its objection, referring to stocks whose value rises only because of Internet chatter and not for economic reasons.
Revlon shares fell as much as 34% to $5.62 on Monday before rebounding to around $8.22, leaving them down about 3% for the day. That price is up from just $1.17 in June.
Almost all of the official commission is appointed by the Office of the U.S. Trustee, a division of the U.S. Department of Justice that acts as a watchdog in corporate bankruptcies. In the case of Revlon, the office appointed an unsecured creditors’ committee, but last month overruled shareholders.
The shareholder group, which claims to own 4.7 percent of Revlon’s common stock not held by insiders, asked Jones on Aug. 9 to order the U.S. trustee to appoint a panel. The stock closed at about $8 that day.
Forcing Revlon to fund lawyers and other advisers for a minority group of shareholders would be a waste of money, the company said in court filings. Official committees have their advisers’ fees paid by the bankrupt company.
Shareholders say recent prices suggest a chance to get something back
Revlon filed for bankruptcy in June as a global supply chain crisis squeezed the debt-ridden company as it struggled to tap into a broader boom in cosmetics sales driven by social media influencers.
Investor Ron Perelman’s MacAndrews & Forbes holding company owns about 85% of Revlon.
The case is Revlon Inc., 22-10760, U.S. Bankruptcy Court for the Southern District of New York.
(Adds comment from Revlon’s court filing in second paragraph and clarifies minority stock ownership in eighth paragraph.)
Most Read by Bloomberg Businessweek
©2022 Bloomberg LP