Stocks for Kodak on Monday was down by as much as 30 percent. This came as the US International Development Finance Corporation (DFC) temporarily paused its loan of $765 million to the camera company.
On July, Kodak said it will start venturing into drug-making business. The firm, once popular for selling cameras, also secured a loan from the government. The deal between Kodak and the federal agency was an attempt for the US to reduce dependency from foreign countries in terms of drug manufacture. Kodak will be making the components to be used for producing medicines. It is also an effort for the country in its invoking of the Defense Production Act.
On July 28, we signed a Letter of Interest with Eastman Kodak. Recent allegations of wrongdoing raise serious concerns. We will not proceed any further unless these allegations are cleared.
— DFCgov (@DFCgov) August 7, 2020
DFC announced on Twitter last Friday the decision to put the funding on hold. “Recent allegations of wrongdoing raise serious concerns. We will not proceed any further unless these allegations are cleared.”
Kodak’s share dropped by as much as 42 percent after the DFC’s announcement, but somehow recovered ending with only a slide of 27.89 percent. Stocks for Kodak were in the past weeks have become popular following the partnership with the government. Kodak traded at $2 per share before the loan was publicized, which shoot to as much as $60 in only a matter of days.
The federal body’s move of suspending the deal came as there were suspicious of the heavy trading volume on Kodak’s stock. It even rose by over 2,000 percent after the company won the loan from the government on July 28. Even executives of Kodak, including its chief exec Jim Continenza, were heavily criticized for obtaining stock options before the announcement of the deal with the DFC.
Board for the camera-turned-pharmaceutical company were also cooperating with the investigation by the Security and Exchange Commission and the Congress (SEC). The SEC intends to probe Kodak to know if they are in violation of any security law. They were alleged of disclosing its information to a news outlet prior to its announcement to investors, per the Wall Street Journal. Kodak also said it is conducting an internal probe.
Among those who urged SEC to conduct an investigation was Sen. Elizabeth Warren of Massachusetts. She wrote in an open letter: “There were several instances of unusual trading activity prior to the announcement, raising questions about whether one or more individuals may have engaged in insider trading or in the unauthorized disclosure of [the loan].”