Kodak(!?) Early Stock Movements

Firstly, yes this is a blast from the past for the “Eastman Kodak Company” NYSE:KODK (which filed for bankruptcy in 2012), probably most famous for its photographic film. (Kodak was an early innovator in the digital camera space, but it didn’t become the blockbuster/pivot they had hoped for…)

Kodak was awarded a $765 million loan from the US Government (for producing drug ingredients). That figure is nearly 8x KODK’s market capitalization on July 24, about $92 million. It’s a huge loan for KODK. To emphasize, it’s a very very material development for KODK. But the news and information was haphazardly released, and there was a lot of early trading which got ahead of a big upswing in the stock price.

This Fox Business article does a great job of the more detailed timeline, but the rough notes are:

  • Monday July 27: Tweets and local articles are alluding to an “initiative” between KODK and the US Government.
  • Tuesday July 28: WSJ published an article, and KODK announcing later in the afternoon

Now, in my opinion, is an illustration of everything that is wrong with this situation…

KODK price and volume July 23 – 30, 2020, labels A,B,C

Label A: Monday July 27, the day before the formal announcement, and tweets & local articles alluding to the “initiative”, the KODK stock gains 24% and the trading volume is 17x the trailing two days! That’s a lot of activity based on not much news. It’s a gray area, since information was published online it might not be insider trading, but it just looks clumsy between both KODK and the US Government. At some point, too much information was shared and too early. For those who did buy on Monday…

B: The news of the loan is distributed during the course of Tuesday July 28. This is a loan. Not some new product, revenue, or M&A/transaction. For a company struggling to reinvent itself after a 2012 bankruptcy, the loan announcement attracts enough street money to triple the stock price. Zombie market much?

C: Wednesday July 29 and the news has been out for a full day. My speculation, but now the common or retail investor is wanting to get in on the action and chasing the gains. Such as from the convenience of smart phones using Robinhood. Money pours in and KODK is up another 4x!

In the span of three business days, KODK was up 1580%! I understand it’s the nature of the game for people to chase the gains on Wednesday, but the early news bits on Monday just look so unprofessional to anyone who was involved in formalizing the loan. Especially in these extraordinary times, the public markets deserve better!