Securities & Exchange Commission Investigating Kodak
According to The Wall Street Journal, the U.S. Securities & Exchange Commission (SEC) is investigating Eastman Kodak’s disclosure of a $765 million loan it’s slated to receive from the federal government.
The announcement from Kodak – which was posted on its website on July 28th – and the announcement from the federal government on the same day, sent Kodak’s share price soaring – resulting in a chart like the one below, with its share price, once at $1.55 in March 2020, soaring up to $43.46 (but now down to $14.40).
Under the loan agreement, Kodak would manufacture various pharmaceuticals at the Eastman Kodak Business Park that it operates in Rochester, New York. The aim is to solve shortages of pharmaceuticals that are manufactured overseas, primarily in China and India, that have occurred because of the COVID-19 pandemic. The company would also manufacture hydroxychloroquine, which is said by some to be an effective COVID-19 treatment.
However, on July 27th, a day before Kodak, as well as the U.S. government, announced the deal, shares of Kodak soared nearly 25 percent, with trading volumes far exceeding those in previous sessions.
The SEC is said to be investigating just how Kodak disclosed the deal.
The Wall Street Journal previously reported that Kodak had released information about the loan to local reporters in Rochester, New York, on July 27th with no embargo time. Several media outlets published related stories and then deleted them upon Kodak’s request.
“The company’s internal communications team did not intend for the news to be published by the outlet in question,” a Kodak spokesperson told CNBC on Tuesday.
Complicating the matter is that the New York Times reported that Kodak CEO Keith Continenza received 1.75 million Kodak stock options that allowed him to purchase Kodak shares at prices between $3.03 and $12 per share a day before the announcement of the government loan.
However, a Kodak spokesperson told the Times that Continenza’s new options “are paper only” and that “Mr. Continenza has not received any proceeds nor does he have any intention of selling.”
A Kodak spokesperson said the company will fully cooperate with the SEC investigation.