Small Cap Stock Watch: The Best And Worst Performers This Week
Investors earned a bit of a breather from the depths of the bear market this holiday-shortened week, as the S&P 500 rebounded 6.5% and the Russell 2000 index of small cap stocks jumped 5.6%.
One of the biggest and strangest winners was cosmetics company Revlon (REV), which filed for bankruptcy last Thursday but still more than doubled this week from $3.73 to $7.95 per share after tripling from its low last week. Controlled by billionaire Ron Perelman, whose daughter Debra Perelman is still its CEO, Revlon is a shell of what it was during its 20th century heyday and has about $3.8 billion in debt on its balance sheet. Its stock was an easy mark for short sellers as it fell 90% from the beginning of the year, when it traded at $11.34, to its low last Monday at $1.17. Short interest made up 37.6% of its float, making it “a perfect candidate for the most speculative retail cohort,” according to Vanda Research.
Speculators rallied on social media to pump the stock higher, much like they did with meme stocks like Gamestop and AMC last year and Hertz when the rental car company went bankrupt in 2020. Stockholders’ shares generally become worthless during bankruptcy reorganizations while creditors recoup as much of their money as they can, often in the form of equity in the newly reorganized company. The Reddit gamblers are betting on just how high they can push it before it crumbles.
Other small cap stocks made more understandable moves higher this week, like Williamsville, New York-based 22nd Century Group (XXII), which makes reduced-nicotine cigarettes and jumped 48% higher. 22nd Century Group received FDA approval last December to market its product with 95% less nicotine than conventional cigarettes, and on Tuesday this week, the FDA proposed a rule that would restrict the amount of nicotine allowed in cigarettes. The FDA also ordered e-cigarette maker Juul to remove its products from the U.S. market on Thursday. 22nd Century Group generated $30.9 million in 2021 revenue, far from industry leader Philip Morris’ $31.4 billion in net sales, but investors are hoping it can take more market share under the new proposed regulations.
Indian streaming service Lytus Technologies (LYT), which has almost 8 million users and just went public on the Nasdaq exchange last Wednesday, has soared 740% in its first seven trading days. The top performing small cap this week was Convey Health Solutions (CNVY), a healthcare tech and data analytics company which TPG announced it is taking private at more than double its previous stock price. The private equity firm just listed Convey Health a year ago and still owned 75% of it, but reversed course and bought back the rest after Convey Health lost two-thirds of its value following the IPO.
These are the 10 top performing U.S.-listed stocks of this week with market capitalizations between $300 million and $2 billion, according to Factset data.
Few companies suffered significant declines, but the biggest loser was Grove Collaborative Holdings (GROV), an e-commerce retailer which sells sustainable household cleaning and personal care products and went public in a SPAC deal a week ago. Its stock sunk 33.5% in its first full week of trading. Movie rental company Redbox (RDBX), another favorite of Reddit meme stock traders this year, also retreated 19% this week to a price of $9.75, though it’s still up fivefold since the beginning of March. In May the company announced that it would be acquired by Connecticut streaming media company Chicken Soup for the Soul Entertainment (CSSE) in an all stock transaction valued at less than $0.70 per Redbox share. A late Friday gain nudged Redbox out of being one of this week’s 10 worst small-cap performers.
Below are the rest of the week’s worst-performing stocks with market values between $300 million and $2 billion.