One of the biggest losers on Monday happened to be Kodak (NYSE: KODK). A well-known brand from back when it used to be a photography business, the company has since shifted its focus on developing pharmaceutical products instead. More specifically, Kodak was expecting a major government loan to come in to help the company transition into producing drug ingredients from its factories. Unfortunately for Kodak, shares ended up plummeting on news that this much-needed loan is put on pause. The reason is that there might have been some insider trading prior to the deal’s original announcement.
Kodak had originally been slated to receive a $765 million loan in order to develop drug ingredients. Its part of a wider plan called the Defense Production Act, which aims to bring pharmaceutical manufacturing back to the U.S. As it turns out, the Securities and Exchange Commission (SEC) is supposedly investigating how the company chose to reveal this deal to the public.
The main issue is that there might have been some issues regarding stock options for Kodak’s executive team, who were well aware of the announcement beforehand. Considering how much shares have jumped in light of this news, there’s a strong possibility that there really was some insider trading involved in this case.
“On July 28, we signed a Letter of Interest with Eastman Kodak. Recent allegations of wrongdoing raise serious concerns. We will not proceed any further unless these allegations are cleared,” stated the U.S. International Development Finance Corporation. White House spokeswoman Kayleigh McEnany added that the Trump administration “will not proceed any further unless these allegations are cleared,” adding that the President himself was taking this matter very seriously.
As it turns out, the day before this deal was announced, over 1.6 million shares had been traded. That’s substantially more than the 230,000 or so daily average that Kodak typically sees. Taking this into consideration, it’s not surprising that the SEC suspects something more to be afoot here. Kodac went on to say that it would be cooperating with federal authorities while launching its own internal investigation into the affair.
Shares of Kodak ended up plunging by around 29.2% in response to the news. The company had been on a steady tumble for the past few years, with Kodak losing the vast majority of its valuation since 2016. However, prices ended up shooting up when news broke about this proposed government loan. Overall, Kodak remains a questionable company to invest in, especially if this loan falls apart. On the case that this happens, shares are likely to collapse back to where they were before this announcement was made.
Eastman Kodak Company Profile
Eastman Kodak Co is a United States-based company. The company operates via several business segments: Print Systems, Enterprise Inkjet Systems, Kodak Software, Brand, Film and Imaging, Advanced Materials and 3D Printing Technology and Eastman Business Park. The print systems segment which derives majority revenue offers digital and traditional products and services to various businesses, such as commercial print and book publishing, and this segment contributes over half of total revenue. The company has a global business presence, with overseas markets accounting for a majority of revenue. – Warrior Trading News