1 More Reason To Avoid Kodak
In the last month and a half, I’ve written two articles on why you should avoid investing in Kodak stock.
Here’s a brief recap of what I said then about avoiding the stock before we get to today’s article…
If you want to read the earlier Kodak articles in full use the links above.
Because today I’m going to show you another reason to avoid its stock.
- Kodak Hasn’t Produced Any Pharmaceuticals In Decades
Kodak got this $765 million loan to produce ingredients for drugs and pharmaceuticals… But there’s one huge problem.
Well one more huge problem on top of the other ones above.
It hasn’t produced any pharmaceuticals since 1993 when it sold out of its failed pharmaceuticals division at a loss of billions of dollars.
In the release announcing this $765 million loan it says, “Kodak is using the funds to “launch a pharmaceuticals division to make essential drug components in “chronic national shortage.”
Emphasis is mine above.
When you read launch above think start.
In the 27 years since 1993 Kodak hasn’t produced any pharmaceuticals or drugs.
And yet is got a $765 million loan to do so.
Could this loan lead to more success for the company in the future?
But there’s no way I’m investing in its stock based on hopes… Especially when you consider all 4 Reasons To Avoid Kodak together.
Stay away from Kodak and the rampant speculation going on in its shares.
This is from the second article…
Since then, things have only gotten worse for the once proud company.
On August 10th, 2020 Kodak shares cratered when the US International Development Finance Corp announced it was withholding its planned $765 million loan to Kodak due to “regulatory scrutiny after recent allegations of wrongdoing that raise serious concerns.”
What is this you may ask?
Allegations of insider trading by members of Kodak’s executive team.
Specifically, stock options being awarded to members of Kodaks team just 48 hours before the loan announcement.
Another allegation involves Kodak’s CEO James Continenza. The day before the loan was announced Kodak shares traded at a staggering volume of 1.6 million and rose 25%.
Its average daily volume before this date was between 50,000 and 250,000 shares traded per day.
That same day, Kodak awarded Mr. Continenza 1.75 million stock options that allowed him to buy Kodak stock between $3.03 and $12 per share.
At one point these options alone were worth up to $50 million after the loan was announced.
And these options were granted just 24 hours before announcement of the loan.
This looks extremely suspect on all accounts.
On September 16th, its stock skyrocketed again “after a special committee hired by Kodak to investigate how it disclosed a U.S. government loan found they broke no laws.”
Hard to believe… But let’s say this was a true investigation and give them the benefit of the doubt.
This still doesn’t explain why this same committee found “several governance concerns” from Kodak’s handling of this loan.
The SEC hasn’t released any info from their investigation yet. And they’re the ones that have regulatory authority over these kinds of issues.
And it also doesn’t solve the main issue I raised in the original article… Kodak hasn’t produced pharmaceuticals in decades. Yet it got a $765 million loan to produce them.
Not much in this situation makes sense. And because of everything that’s still going on around Kodak, avoid its stock to preserve your capital and Depression Proof Your Portfolio.
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Disclosure – Jason Rivera is a 13+ year veteran value investor who now spends much of his time helping other investors earn higher than average investment returns safely. He does not have any holdings in any securities mentioned above and the article expresses his own opinions. He has no business relationship with any company mentioned above.