Figure 1: Revlon: Are Meme-Stock Investors Just Putting Lipstick on a Pig?

(Read more from the Wall Street Memes: ATMD Digital: Why Did the Stock Suddenly Skyrocket?)

Revlon  (REV) - Get Revlon Inc. Report  shares jumped nearly 90% after the company announced it had received permission from a U.S. bankruptcy court to proceed with a $1.4 billion loan.

Two months ago, Revlon filed for Chapter 11 bankruptcy protection in an attempt to reorganize its debts and assets. The company has about $3.5 billion in debt, with nearly half of that coming due in 2024.

According to Revlon, the huge pile of debt has caused the company to dry up its cash reserves, and it will not be able to meet its supplier debts without a loan.

Part of the borrowed cash will be used to pay off outstanding debts with BrandCo, which had lent about $1.8 billion to Revlon.

Revlon's history over the last few decades is characterized by high debt and the decline of its business, which was once huge. Revlon's stock reached $560 per share in 1998.

Revlon's brand has been tarnished in recent decades due to controversies related to animal testing. Also, Revlon has lagged behind the competition. The company has struggled to gain "influencer" endorsements and compete with giants such as L'Oreal  (LRLCY)  and Unilever  (UL) - Get Unilever PLC Report .

Due to the weaknesses in its heavily indebted business, Revlon's stock has become a target for short sellers.

Currently, nearly 60% of the company's float is being shorted, which comprises some 4.69 million shares. This is a substantial increase from June, when the short interest was around 40% of its float.

After Revlon filed for Chapter 11 bankruptcy protection, the stock plummeted more than 70% in just a few days. However, growing short interest in a "legacy" brand has led retail investors to take interest in Revlon's stock. Over the past few months, Revlon has acquired "meme stock" status.

Figure 2: Revlon's share price and short interest percentage.

High levels of trading volume led to short squeezes of nearly 600% in mid and late June. And at the end of July, another short squeeze sent the stock up nearly 100%.

Revlon is just trying to survive. The company's priority should be to reorganize its debts and save itself from bankruptcy. And so far, Revlon may have done better than expected.

After its recent "victory" of having its bankruptcy plan approved, retail investors have lifted the price of Revlon's stock.

Now, looking further ahead, we should expect more volatility for Revlon. It's hard to defend investing in a company with an insolvent balance sheet in which the company's liabilities exceed its assets — Revlon trades at a book-value-per-share ratio of -38.3.

But Revlon could be an interesting stock for short-squeeze hunters to follow. Growing short interest in the stock, high borrow fees (400% on July 29), and very few shares available for lending make REV short sellers particularly vulnerable.

(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting Wall Street Memes)

Co-producer of The Street's financial channels: Apple Maven, Amazon Maven and Wall Street Memes. Researcher and operations manager at DM Martins Research.