Kodak shares collapse after pharmaceutical loan sparks “serious concerns”
Aug 11, 2020
Eastman Kodak Company was supposed to receive a loan of $ 765 million (£ 587 million) from the US government to allow it to increase pharmaceutical production as part of the fight against Covid-19. That loan is now on hold for the time being, due to “recent allegations of wrongdoing,” the US International Development Finance Corp (DFC) said.
The allegations relate to securities transactions carried out by Kodak and various executives when he learned he was getting the loan – insider trading, essentially. According to FT, “The $ 765 million loan, the first under the Defense Production Act since the onset of the coronavirus pandemic, caught the attention of members of Congress as the company’s shares rose before its announcement. Equity purchases in June by Jim Continenza, executive chairman of Kodak, and Philippe Katz, a member of the board of directors of the Rochester, New York-based company also came under scrutiny.
“The recent allegations of wrongdoing raise serious concerns,” the DFC tweeted. “We will not go any further until these allegations are clarified,” the DFC said. He was referring to a letter of interest he signed on July 28 with Kodak.
Kodak shares rose more than 1,000% last week after the loan deal broke, with many executives with stock options eagerly awaiting a one-off payment. Today, however, the share price has fallen more than 30%. Kodak announced that it has appointed a committee of independent directors to its board of directors to conduct an internal review.