What’s Happening To Kodak Stock? Shares Plunge Over 40% After Government Loan Is Held Up On Allegations Of Wrongdoing

TOPLINE

Shares of Eastman Kodak, which initially surged on an announcement that the government would provide a $765 million loan to help shift its efforts into the drug industry, tanked on Monday amid news that the deal would be put on hold as regulators look into allegations of wrongdoing.

KEY FACTS

Key background

The $765 million loan awarded to Kodak was the first of its kind under the Defense Production Act with the goal of helping the company, which has been historically focused on photography, to pivot to drug production. The company said it would use the loan to expand existing facilities and launch a new Kodak Pharmaceuticals arm which would focus on making “generic, active pharmaceutical ingredients,” as Trump described when announcing the deal. Trump later walked back his comments, however, adding that he was “not involved” in the loan.

What to watch for

Kodak released news of the loan to reporters in Rochester, New York on July 27, a day before Trump publicly announced the deal. Several outlets had picked up the story before Kodak then asked them to delete it. The company’s internal communications team reportedly “did not intend for the news to be published,” according to a Kodak spokesperson. SEC filings show that on June 23, Kodak’s CEO and chairman, James Continenza, purchased roughly 46,700 additional shares in the company. A day before the federal loan was announced, Kodak granted him options for an additional 1.75 million shares, almost 29% of which he vested immediately. There has not yet been any indication from regulators that Continenza’s stock purchases are at the center of investigation, however.

Tangent

Kodak said on Friday that it launched an internal investigation and will cooperate with any inquiries from federal agencies. In an open letter to the SEC, Senator Elizabeth Warren (D-Mass.) called on the agency to look into the spike in trading that occurred before the announcement, raising concerns about “insider trading” or “unauthorized disclosure of material, nonpublic information.” The House Financial Services Committee similarly called for an investigation into the company due to “growing concern regarding insider trading.”