Kodak sudden stock fall amid US govt loan rumours – Wall Street Journal

Kodak is at the centre of an investigation by the Securities and Exchange Commission (SEC) regarding a government loan of $765m to produce drugs at its US factories. Word of the loan got out on 27 July, causing Kodak's stock price to rise 25% in a day. Allegedly, Kodak had shared information with media about a possible agreement with the Trump administration before the public announcement. The news was published and subsequently deleted following a request from the company. "The concept of the deal was good, but I'll let you know. I wasn't involved in it. It's a big deal. It's a way of bringing back a great area, too, in addition to pharmaceuticals. Kodak has been a great name but obviously pretty much in a different business. So we'll see what that's all about," Trump said during a briefing. – Claire Badenhorst.Fortunes Won and Lost Trading in Kodak Stock: Inside a Wild Week.By Geoffrey Rogow and Michael Wursthorn.In the span of six trading days, Eastman Kodak's volatile stock made millions for some and destroyed the savings of others..___STEADY_PAYWALL___.Kodak's stock price first rose Monday July 27th and then surged from $2 to as high as $60 over the following two sessions on an intraday basis thanks to the preliminary disclosure of a possible $765m government loan to make drug ingredients at its US factories. The stock then fell precipitously.Driving the sudden swings was a series of events: early rumors of the deal on social media, a White House press conference touting the possible loan, stock option grants given to a Kodak executive as well as several board members and confusion over whether the deal was final. Kodak is under investigation by the Securities and Exchange Commission as well as congressional committees.A Kodak spokeswoman said the company wasn't aware of the SEC investigation but would cooperate. She said Kodak intends to cooperate with the congressional inquiry.No pandemic connectionThe volatility was the perfect environment for a wave of amateur investors who have become active day traders. These traders have plunged into Overstock.com Inc., Tesla Inc. and others on a belief the companies could weather the coronavirus pandemic better than competitors or more concretely profit from it.Kodak is the most striking example yet of this trend. Its sudden rise and plummet offer a warning for investors who ignore company fundamentals and focus instead on a potential pandemic connection."When investors see something related to Covid-19, they act like sharks going into a frenzy," said James Angel, a Georgetown University finance professor, on small investors."Investors should always be mindful of fads," Mr Angel added. "Fads lead to crowded trades, and crowded trades end badly. People who chase fads get left holding the bag."Also read: How Robinhood helped day traders become a force in US markets – Wall Street JournalA good day gone badKodak's wild ride started after local news reports and tweets sent shares of the company up 25%.For Jason Bulinski, chief investment officer and portfolio manager at First Midwest Bank, the big rise was an immediate moneymaker. He had picked up some 162,000 shares in May.Shares of Kodak tripled in the premarket session on Tuesday July 28th."Should be a good day," Mr Bulinski said in a morning email to his team about Kodak's stock.He had already more than doubled his original investment, but he still wanted to wait to sell. Mr Bulinski said he expected a surge as individual investors jumped into the stock.Mr Bulinski was right. During that session, Kodak stock surged to $7.94 a share from $2.62 the previous day.That evening, Alex Olsen, an airline industry worker, was watching the news when President Trump said his administration was lending Kodak $765m to support the launch of Kodak Pharmaceuticals. The way the 44-year-old Florida resident saw it, this was the perfect time to buy Kodak."This is why you invest," Mr Olsen said. "I have the option of helping a company save us and make some equity."The next morning, when Mr Olsen got in, the stock was skyrocketing again. He bought some shares at $17, more at $24 and a third group at $52.50. For the day, he bought 2,710 shares at an average of $35 a share.Mr Olsen was in for about $95,000. And he wasn't alone.More than 100,000 users of the popular trading app Robinhood jumped in that day, helping to push Kodak's stock price higher, according to the data-mining website Robintrack.For some professional traders, this run higher was a sign to get out."Run, don't walk. KODK up 550%! Sell all," Mr Bulinski said to several co-workers in an email that morning, referring to Kodak's ticker symbol. Mr Bulinski said he booked a 19-fold return for clients, selling all of his shares at an average of $48 apiece—for roughly $7.8m.Investors were running blind into shares of Kodak, pushing its valuation well beyond his own projections, Mr Bulinski said in an email to his team later in the day.As the week wore on, the stock took a precipitous drop as the details of the preliminary agreement were shared.Also read: Is it too late to join the gold rush?Trading is a gambleSome investors said it was Wednesday evening when they first realised that the agreement between the government and Kodak was far from a done deal. The loan had to be secured by Kodak's assets and included performance contracts. Moreover, the agreement was still going through due diligence.The stock surge faded Thursday, and a selloff took over Thursday and Friday as the company's share price fell all the way back down below $22.By Friday afternoon, Mr. Olsen decided he wanted nothing to do with Kodak.He felt duped and angry after finding out the deal was far from certain. Mr Olsen had only started trading this year, using a TD Ameritrade brokerage account. He was down almost $30,000 when he sold out."I guess what I learned is trading is just gambling," Mr. Olsen said. "That's a fact."After Mr. Olsen sold out, the selling didn't stop.On Monday of this week, Kodak shares tumbled as one of the company's largest shareholders converted bonds to stock. In a conversion, currently issued shares are diluted.In the wake of the wild trading, the SEC opened an investigation looking at the company's disclosure of the preliminary agreement and the timing of options grants to Executive Chairman Jim Continenza.So far, no senior executives at Kodak have sold any shares in the company. But some people close to the firm moved their shares during the market rally. A board member, George Karfunkel, donated three million shares of his stake in the company to a religious institution on July 29th, according to a securities filing. The Kodak spokeswoman declined to comment on the stock transactions.Moses Marx, a major Eastman Kodak shareholder as well as a business partner and father-in-law of a board member, Philippe Katz, sold blocks of shares at average sale prices of $18.17 and $40.41 last week. The trades netted Mr Marx a gross profit of $9m, according to a securities disclosure he made on Monday August 3rd. Attempts to reach Mr Marx were unsuccessful.The block of shares he sold at $18.17 was the same size as one he bought March 23rd at $1.55 a share, implying a 10-fold gain, or nearly $900,000 on those shares.Write to Geoffrey Rogow at geoffrey.rogow@wsj.com and Michael Wursthorn at Michael.Wursthorn@wsj.com. *This article originally appeared on The Wall Street Journal.

Kodak sudden stock fall amid US govt loan rumours – Wall Street Journal

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