Shares of Eastman Kodak, which initially surged after it was announced that the government would provide a $ 765 million loan to help shift its focus to the pharmaceutical industry, fell on Monday as the deal was put on hold as regulators review allegations of wrongdoing. .
Eastman Kodak stock fell more than 40% on Monday morning after a federal agency tweeted it was withholding the $ 765 million loan.
“The recent allegations of wrongdoing raise serious concerns. We will not go any further until these allegations are clarified, ”the US Corporation for International Development Finance (DFC) said in a recent statement. declaration about the case.
Kodak stock jumped 25% a day before the loan was announced, catching the attention of the Securities and Exchange Commission (SEC) which is now search in the circumstances of the transaction.
The stock was also so volatile the day after the announcement – with over 100,000 retail investors adding it to their portfolios at Robinhood – that it was arrested 20 times in one day.
Kodak shares have rallied from the initial plunge this morning and are now down nearly 30%; shares are up 270% so far this year.
The $ 765 million loan to Kodak was the first of its kind under the Defense Production Act in an effort to help the historically focused photography company turn to drug production. The company said it would use the loan to expand existing facilities and launch a new Kodak Pharmaceuticals business that would focus on manufacturing “generic active pharmaceutical ingredients,” as Trump described when announcing the deal. ‘OK. Trump later returned his comments, however, adding that he was “not involved” in the loan.
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Kodak released the 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 asked them to delete it. According to a Kodak spokesperson, the company’s internal communications team “had no intention of releasing the news.” Documents filed with the SEC show that on June 23, Kodak CEO and Chairman James Continenza purchased about 46,700 additional shares of the company. A day before the announcement of the federal loan, Kodak granted him options for a 1.75 million additional shares, of which nearly 29% were acquired immediately. However, regulators have yet to give any indication that Continenza’s share purchases are the focus of the investigation.
Kodak said on Friday that it launched an internal investigation and will cooperate with all requests from federal agencies. In an open letter to the SEC, Senator Elizabeth Warren (D-Mass.) Called on the agency to examine the surge in trading that occurred before the announcement, raising concerns over ‘insider trading’ or the “unauthorized disclosure of material, non-public information. . The House Financial Services Committee also called for an investigation into the company due to “growing concern about insider trading.”