It was just a few days ago when shares of Kodak (NYSE:KODK) surged on news it received a $765 million loan to produce drug ingredients under the Defense Production Act.
With more than 100,000 Robinhood users rushing to add Kodak to their portfolio, we wrote it's almost certain this will not end well. Shares of Kodak are now down more than 75% since their high last week, trapping investors who chased it.
We also wrote about Kodak CEO Jim Continenza brushing off concerns about unusual trading in the days leading up to the news release. "This has been a pretty tight kept secret," Continenza said.
With the story gaining attention over the last few days, the U.S. Securities and Exchange Commission is investigating Kodak’s disclosures about the loan from the U.S. government. The investigation is reportedly in the early stages and may not result in allegations of wrongdoing.
Kodak released the news to local news stations on July 27 without an embargo on its release. A few outlets posted the news before deleting it at Kodak's request. "The company's internal communications team did not intend for the news to be published by the outlet in question," Kodak said.
Continenza is also facing pressure as the compensation committee of the company’s board granted him 1.75 million stock options giving him the right to purchase shares between $3.03 and $12 just before the news broke.
Senator Elizabeth Warren also called on the SEC yesterday to look into trading of Kodak shares prior to the announcement.
"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 said.
Kodak said it "intends to fully cooperate with any potential inquiries" in response to Warren's statement.
What the SEC determines in its investigation remains to be seen as shares of Kodak continue to plunge since last week's high.