January 17, 2021

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Kodak shares tank more than 40% as government loan is put on pause while allegations investigated

Using a slow shutter speed an attendee is blurred as he walks by the Kodak booth during CES 2018 at the Las Vegas Convention Center on January 10, 2018 in Las Vegas, Nevada.

David Becker | Getty Images

Shares of Eastman Kodak plunged more than 40% during premarket trading on Monday after a federal agency said it was reviewing a previously announced $765 million loan for the onetime photography pioneer to produce drug ingredients.

“Recent allegations of wrongdoing raise serious concerns. We will not proceed any further unless these allegations are cleared,” the U.S. International Development Finance Corporation said in a tweet Friday.

The review of funding comes as the Securities and Exchange Commission is reportedly investigating how the company disclosed the deal with the government, according to a report from The Wall Street Journal. The probe is also reportedly reviewing stock options that were granted to executive chairman James Continenza ahead of the announcement.

The stock has been on a wild ride since the funding was announced on Tuesday, July 28. But trading activity picked up the day before the official announcement, which raised some eyebrows on the Street.

The day before the deal was announced the stock jumped 25%, and saw 1,645,719 shares exchange hands, far surpassing the average daily trading volume of 236,479 for the year prior, according to data from FactSet.

As the news of the deal broke, Kodak, which had been trading around $2.60, skyrocketed. Within two days, the stock was trading at $60. In the span of just 24 hours, more than 100,000 investors added the stock to their account on Robinhood, an app popular with millennial investors, according to data from Robintrack. The stock was so volatile the day after the announcement that it was halted 20 times during the session.

Sen. Elizabeth Warren, D-Mass., has called on the SEC to look into trading that occurred before the Trump administration’s public announcement of the deal with Kodak.

“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 material, nonpublic information regarding the forthcoming $765 million loan awarded under the Defense Production Act,” Warren wrote in an open letter.

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