U.S. Trade Rep Slams Kodak – But Was PR Error to Blame?

For those following the Eastman Kodak alleged insider-trading story, this week, U.S. Trade Advisor Peter Navarro slammed Kodak executives in an interview with CNBC.

Navarro blasted Kodak leadership, stating: “Based on what I’m seeing, what happened at Kodak was probably the dumbest decisions made by executives in corporate history. You can’t fix ‘stupid.’”

Kodak is currently under investigation by the U.S. Securities and Exchange Commission. The U.S. government has also put on hold on a proposed $765 loan that would have enabled Kodak to begin manufacturing pharmaceuticals at its Eastman Kodak Business Park in Rochester, New York.

The troubles began for Kodak on July 27th, when the firm informed some reporters in New York of the government’s letter of intent for the loan – a day before the government’s and Kodak’s official announcement. This coincided with unusual stock-trading activity on July 27th, with Kodak’s share price which has averaged at about $2 per share, skyrocketing to $60 per share at one point. Additionally, a day before the announcement, Kodak gave its CEO 1.75 million in stock options.

Possible PR Error

However, Forbes reports that a public-relations error – not insider trading – may be behind the whole mess:

“At some point (on July 27th), Kodak issued a press release detailing its receipt of the government loan. Two Rochester, N.Y.-based major network affiliates ran the story. In addition, the story was placed on Twitter.

“Kodak said it made the mistake of not placing an ’embargo’ on the press release. An embargo prohibits the media from broadcasting the contents of a press release until a specified time. Without the embargo, journalists were quick to report the news, not wanting to be scooped by a rival.”

Once the press release was published, Kodak’s share price, shot up 25 percent on heavier than normal volume.

Class-Action Lawsuits

That PR error may turn out to be a very expensive one for Kodak in more ways than one. On August 18th, for instance, The Portnoy Law Firm advised investors that it’s filing a class-action lawsuit on behalf of Kodak investors who acquired Kodak shares between July 27, 2020 and August 7, 2020.

According to the complaint, Kodak is said to have made:

“..false and misleading statements to the market. Kodak failed to disclose that it had granted insiders stocks options worth millions just before the public announcement of a $765 million loan from the U.S. International Development Finance Corporation to develop medicines to treat COVID-19, an announcement which the company knew would immediately increase the value of its shares.”

The complaint also alleges that “Kodak insiders” also purchased tens of thousands of shares before the announcement, acting on the news before it went public. Based on these facts, the complaint concludes, Kodak’s “public statements were false and materially misleading. When the market learned the truth about Kodak, investors suffered damages.”

Last week, another law firm, investor-rights law firm, Labaton Sucharow, announced that it’s investigating “possible breach of fiduciary duty claims on behalf of Eastman Kodak Company as well as securities litigation claims.” It’s also asking Kodak investors to contact it.

On August 18th, another law firm, Hagens Berman, urged Kodak  investors with losses in excess of $250,000 to report their losses and join a securities-fraud class action that it’s filed.

As of now, that $765 million loan for Kodak remains on hold.

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