One of the most remarkable stories of recent days was related to the photography company Eastman Kodak Company (NYSE:KODK). The company had announced that it was going to get into the drug ingredients business after the United States government granted it a loan of as much as $765 million.
Government Loan Is Put On Pause While Allegations Investigated
Following the announcements, Kodak went on a remarkable rally and in only two frenzied days of trading, the stock soared by as much as 600%. However, it seems that things have taken a different turn after the United States International Development Finance Corporation announced on Monday that it is not going forward with the disbursal of the loan in light of allegations of wrongdoing.
The IDFC sent out a tweet in which is stated that until these allegations are cleared the loan is going to be on pause. That is a major setback for Kodak and also the investors who piled on to the stock on the back of the announcement. Hence, it came as no surprise when the Kodak stock tanked on Monday and declined by as much as 48% on the back of this development. In light of such a turn of events, it is going to be worthwhile if investors kept an eye on the developments over the course of the coming days.
The funding has been paused and is going to be under review. The IDFC possibly decided to take this step after it emerged that the Securities and Exchange Commission is investigating the way in which Kodak disclosed this deal to the government. In addition to that, it is also important to keep in mind that the investigation from the SEC is also going to scrutinize the grant of stock options to the executive chairman of Kodak James Continenza. The stock options had been granted much ahead of the announcement had been made about the IDFC loan.
While it is true that the Kodak stock did recover later on in the day and recouped some of the losses, it is important to keep in mind that the stock had been extremely volatile in early morning trading on Monday. As a matter of fact, trading on the stock had to be stopped by the authorities due to extreme volatility.
The announcement had been made back on July 28 and since then; it had gone on a remarkable rally that made Kodak the talk of the town. However, it was not that particular rally that raised eyebrows. A day before the announcement was made, there was significant activity in the Kodak stock, and that raised suspicion of insider trading with regards to the Kodak stock. The stock had rallied by 25% on the day before the announcement was made.
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