Kodak shares tumble as planned $ 765 million loan frozen
the shares lost more than a quarter of their value on Monday after news that a $ 765 million loan to the company had been suspended, the deal being subject to scrutiny by Congress and regulators.
The US International Development Finance Corp. last month announced plans to lend Kodak the funds needed to produce drug ingredients at its factories. But in a tweet Friday night, the agency said that “the recent allegations of wrongdoing raise serious concerns. We will not go any further until these allegations are clarified.”
A Kodak spokeswoman said Monday that she “appreciates and supports” the agency’s decision to wait for clarification before moving forward with the process. The company announced on Friday that it would launch an internal review.
On Monday, Kodak shares fell 28% to $ 10.73, after losing as much as 43% earlier in the session. The stock ended 2019 at $ 4.65, trading below $ 3 for much of the year before hitting a this year’s high of $ 60 following the loan announcement.
The The Securities and Exchange Commission is investigating how Kodak controlled the disclosure of the loan, news of which began to emerge on July 27, causing Kodak’s stock price to rise 25% that day.
The SEC is also expected to review stock options granted to executives on July 27. Option grants instantly became profitable, at least on paper, after the Kodak loan went public.
Meanwhile, several congressional committees led by Democrats, raised concerns on the “lack of pharmaceutical experience” at Kodak, which was historically a photography company, and the stock option awards granted to executives and board members prior to the announcement.
White House spokeswoman Kayleigh McEnany said on Monday that the administration “will not go any further [with the Kodak loan] unless these allegations are clarified ”and President Trump takes the allegations seriously.
Peter Navarro, President Trump’s business adviser who was involved in the plans, recently distanced himself from the company. “VERY disappointed with last week’s deal with Kodak tarnished by allegations. Absolutely GOOD move from DFC! Mr. Navarro said in a tweet Friday night. Mr. Navarro told the Wall Street Journal on Sunday that “his tweets are crystal clear.”
A spokesperson for the DFC made no further comment.
The Trump administration announced about two weeks ago its intention to loan the former picture leader $ 765 million produce medicinal ingredients. The planned loan, the first of its kind under the Defense Production Act, was to help Kodak produce ingredients for generic drugs. The news caused Kodak shares to skyrocket.
The Journal recently reported that Kodak shared information about a deal between the company and the Trump administration with media outlets ahead of the public announcement. Some media companies then published this information before delete it following a request from the company.
Last week, Mr. Navarro declined to answer a reporter’s question about Kodak on a conference call announcing a separate decree stimulate domestic production of medical supplies and drugs.
At the time the loan was disclosed, Mr. Trump said he was “proud to announce one of the most significant deals in the history of the US pharmaceutical industries.” My administration has entered into a historic agreement with a large American company.
In response to a question about the SEC investigation during a press briefing on August 4, the president said he “was not involved in the deal.”
Write to Rachael Levy at [email protected]
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