September 16th, 2020
Eastman Kodak’s stock, particularly heckled since the announcement of a large government loan supposed to help it launch its pharmacy business, took off Wednesday after a report exonerating the group and its managers of insider trading or violation of internal regulations.
The stock of the group, best known for its films, ended the day up 36% at US$8.51 on the New York Stock Exchange.
At the end of July, an agency, the DFC, had granted Kodak a $765 million loan under a law allowing the federal government to mobilize the private industrial sector for the country’s security needs, so that it could produce up to 25% of the active ingredients needed to prepare generic drugs in the United States.
The company’s share price had risen from $2.62 the day before it was formalized to $7.94 the same day and up to $33.20 the next day, raising suspicions of insider trading.
A law firm appointed by Kodak’s board of directors said Tuesday that the granting of stock options to CEO Jim Continenza and certain officials just prior to the announcement of the loan did not violate stock exchange laws or the company’s bylaws because the transactions were long planned.
The transfer of shares by a member of the board of directors to a charity on the day the stock jumped was also not a violation, according to the firm.
However, it points to “loopholes” in the internal regulations, in particular the fact that some managers are not included in the list of persons who must follow strict rules when buying or selling shares.
“It is clear from the report’s findings that we need to take steps to strengthen our practices, policies and procedures,” Continenza commented in a statement.
“Timely implementation of the recommended actions will be critical as we continue to deploy our long-term strategy and transform our business for the future,” he added.
Doubts were quickly raised about the ability of Kodak, which has never before worked in the pharmaceutical industry, to produce so many active ingredients quickly.
The DFC had suspended its loan a few days after granting it. According to Democratic Senator Elizabeth Warren, the agency also launched an internal investigation into how the loan was decided.