It’s been nonstop bad news for billionaire Ron Perelman: the revoked naming rights at Princeton, the “fire sale” of his holdings, and then this summer’s bankruptcy filing at his marquee asset Revlon, the makeup giant run by his daughter.
But now the mogul may have caught a lucky break.
A horde of frenzied retail investors has piled into Revlon over the last two months, turning it into a “meme stock”—a viral stock with a rabid online following whose value seems to defy conventional financial metrics. That has catapulted Revlon’s share price from a low of $1.08 to more than $6.00, even after the volatile stock dropped 12 percent on Wednesday.
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At least temporarily, that has allowed the billionaire to retain more than $200 million in value, giving him options that wouldn’t be available to most investors in his shoes. In theory, he could offload some of his Revlon shares to eager day traders, which could leave them holding the bag if the meme bubble suddenly bursts.
“There will be more of an incentive for the big 500-pound gorilla in the room, which is Ronald Perelman to say, ‘Let me just unwind some of my shares right now, so that I don't have to, you know, sell those 20 Matisses that I've been collecting over the last two decades,’” said Eric Talley, a professor at Columbia Law School.
Another curious element of the saga is that just 14 percent or so of Revlon’s shares “float,” meaning that they are publicly tradeable. Perelman’s firm MacAndrews & Forbes, meanwhile, controls about 85 percent of the company. In effect, meme stockers have helped rally the smaller pool of tradable stock, which in turn has greatly boosted the value of Perelman’s overall holdings. It’s an anti-establishment army that has made a billionaire even richer.
“Every one of these meme stock CEOs or dominant shareholders must feel like they just hit the jackpot,” Talley said. Prior to going viral, meme stocks are often in the toilet, and execs might feel like they are “gonna be like, flipping burgers at the In-N-Out next month,” he added. “Then suddenly, the meme crowd descends and…make[s] it look like your company's a little bit more solid, even though everyone kind of knows that this is a little bit of a charade.”
Anthony Casey, an expert on corporate bankruptcy at the University of Chicago Law School, agreed that the rally has benefited Pereleman. He noted, however, that if the stock collapses before the billionaire can make a creative move, “that doesn’t help him.”
A representative for Revlon declined to comment. Perelman did not respond to a request for comment before publication time.
Other minority shareholders have seemingly also sought a chance at a pay day. In recent weeks an “ad hoc” group of investors appealed to a U.S. bankruptcy judge to grant them greater representation in the bankruptcy proceedings, arguing that a lot of potential upside was on the line.
Revlon pushed back on the expensive proposal, saying that it was unnecessary because Pereleman’s interests were already aligned with other shareholders, and suggesting, counterintuitively, that the company in reality might not be worth as much as its stock price suggests. In the end, the judge sided against the ad hoc group on Wednesday.
There are still many unanswered questions about how the bankruptcy will play out. Central to that uncertainty is another bizarre incident from 2020, when Citigroup, in an epic bungle, accidentally paid $900 million to Revlon’s creditors. Litigation over the matter, and how it may affect Revlon’s debt, is still pending; the uncertainty may have fed into the meme stock “parlor game,” Talley said.
Perelman hasn’t ditched any of his Revlon holdings, filings show. Just one company exec, chief accounting officer Beril Yildiz, has sold shares this summer—a relatively modest $20,800 worth.
