Kodak Trading Choppy as Loan Controversy Awaits Vote Result

Eastman Kodak share trading has been choppy. A loan the government agreed to grant to the chemicals company is the subject of controversy.
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Eastman Kodak  (KODK) - Get Report lost its premarket steam Wednesday as the results of the presidential election remain unclear.

Shares of the Rochester, N.Y., chemicals company at last check were up 0.5% at $7.18. In the regular session on Wednesday, they have traded down as much as 3.1% and up as much as 5.3%. They were up as much as 8% premarket.

Eastman Kodak has been in the center of a political controversy after the one-time photographic-equipment-maker was granted a $765 million loan by the U.S. International Development Finance Corp. The goal was to increase production of a variety of drugs in an effort to bring drug manufacturing back to the U.S.

The shares soared by a factor of 15 after the announcement but then tumbled after the DFC froze the loan amid allegations of wrongdoing and a Securities and Exchange Commission investigation.

Democrats criticized the arrangement made under a Republican administration and demanded investigations into Kodak's stock trading before the news was released

Sen. Elizabeth Warren (D-Massachusetts) in August took the Trump administration to task over the loan, saying that “it is not at all clear why President Trump, in his Executive Order, chose to give the [DFC] this new loan authority, but the mismanagement of the Kodak loan raises new concerns that it may be fundamentally unsuited to the task.”

Kodak shares rose 25% the day before the loan was announced, and Kodak executives, including CEO Jim Continenza, received 1.75 million stock options a day before it was disclosed to the public.

In September, a law firm hired by the company concluded that Eastman Kodak mishandled the options grant to Continenza but didn’t break the law.

The firm did determine that Kodak’s general counsel didn’t properly inform the board about the potential pitfalls of announcing the loan.

Investors on Wednesday morning may have reacted to the news that a victory by Democratic presidential challenger Joseph Biden did not look as certain as it did prior to Election Day.

The deal may be scrapped by a Democratic administration, while it likely stands a better chance of survival under a Republican White House.

Continenza said last month that the company would push ahead with making generic drug ingredients, irrespective of whether it received government assistance, The Wall Street Journal reported.