It seems that what goes up at a shocking rate, must come down at a shocking rate.
Kodak stock plunged 30% on Monday, after it had soared 2,757% just a few weeks ago. The drop comes after allegations of insider trading put their $765 million government loan on hold. Trading of Kodak was even temporarily halted after it plunged 43% within minutes.
Kodak Momentarily in the Black
The aged film company had only just become relevant again. After failing to keep up with digital media trends, and a disastrous go at the cryptocurrency industry, Kodak was on its last leg.
But the company received a life-saving breath, when the U.S. government offered it a $765 million loan to become a drug ingredient producer. Though the decision to grant such a duty to Kodak was puzzling to many, it was enough to put the company back in the black. Stocks soared as high as 2,757%, jumping from $2.10 to $33.20 within days.
Investors and executives alike found the timing suspicious.
Officials planned to announce the deal on July 29th. But the company announced the loan one day prior to the official release. That move ended up sending shares 25% higher. Even more damning, Kodak executives, including CEO Jim Continenza, received stock options on July 27th. All of this raises alarm bells over potential insider trading. As a result, Kodak’s future in the market will stall. The U.S. Internal Development Finance Corporation (USIDFC) said as much in a tweet:
Recent allegations of wrongdoing raise serious concerns… We will not proceed any further unless these allegations are cleared.
Impacts if the Deal Fails
If executives are indeed guilty of insider trading, the deal with likely fall through. This would be a huge loss to investors, the State of New York, and even the country.
The launch of Kodak Pharmaceutical was going to allow for the U.S. to produce generic active pharmaceutical ingredients domestically. This move would decrease America’s dependency on foreign markets for these goods. Given the pandemic and the fact that the Trump Administration has been drumming up trade wars, this was an important shift. Furthermore, the launch would help mitigate some unemployment in New York State. Kodak Pharmaceuticals was planning to create about 1,200 jobs near its headquarters in Rochester, NY.
Kodak has yet to make a statement, and the USIDFC will not release details until it’s completed an investigation. But for now, investors are holding their breath, unsure of whether to hang on for a possible uptick, or walk away with what they have.