Kodak nosedives after $765M govt. loan is put on hold

Yahoo Finance’s Alexis Keenan joins Zack Guzman to discuss how Kodak shares are plummeting after the company's government loan is put on pause as regulators reportedly investigate allegations of insider trading.

Video Transcript

ZACK GUZMAN: We're seeing Kodak shares right now fall more than 25%. Trading was halted earlier in the session for volatility. And the update there that a government loan, the one that we had talked about last week that was both being asked about by House panels and the SEC, reportedly frozen there.

And for more on what's playing out at Kodak, I want to get to Yahoo Finance's Alexis Keenan, who has those details.

ALEXIS KEENAN: Hi, Zack. Yeah, that stock has just been all over the place since the company made its official announcement on July 28. But the problems lied in activity that came before the actual announcement that day. Stock was jumping already 24 hours before that announcement.

But what has happened is that the Trump administration has actually frozen this prospective loan that the company was announcing that it was going to receive, $765 million, a loan that would actually be funded by taxpayers through what's called the US International Development Financial Corporation. It's the DFC. It's an agency, a rather new one, formed in 2018. And its goal and its purpose is really to invest in the developing world for energy, for technology, for infrastructure and health care.

And Kodak had intended to be part of that health care arm, where they would start actually manufacturing pharmaceutical ingredients for drugs. So way outside of their regular scope with the challenges, of course, that they have faced in the decline of their industry. But still, kind of looked at as a stretch when this announcement was made.

A tweet from the DFC, from the agency on Friday said that based on these allegations of potential wrongdoing that they are seeing that raise some serious concerns, they said that they would stop proceeding with the letter of interest. That's the stage where these comp-- where Kodak was with the agency of actually working out this deal. It wasn't a done deal yet. It was just a signed letter of interest. But they said unless those allegations are cleared, they are not going to move forward.

Now those allegations come from the SEC. A report from the "Wall Street Journal" said that the agency had launched an investigation into both how Kodak disclosed the loan deal, as well as some stock option grants that were extended to its executive chairman before the announcements. SEC filings show that about five days before the deal was announced that he purchased 46,700 shares. And also a day before the announcement had been granted some options, $1.75 million-- million shares, rather, some of which were vested immediately. So that's what the SEC is looking at.

In a statement, the company told Yahoo Finance this. They said the company appreciates and supports the DFC's decision to await clarification before moving forward with the process. They also said that they appointed their own internal committee at the company to look at the activity around these deals. And they are also scheduled to report earnings tomorrow.

ZACK GUZMAN: Yeah, what's shocking is even though that we're seeing the stock's off more than 25% overall since that announcement, shares up about 300%. So still a lot of gains there when we think about just having this loan out there, whether it's frozen now or not.