A Closer Look At The Kodak Chairman's Stock Purchases As Shares Rally 1,500%




 

Eastman Kodak Company (NYSE: KODK) shares are up another 300% on Wednesday and are now up 1,490% since last Friday on news that the company is once again pivoting its business, this time to producing generic drug ingredients.

The rally was fueled in part by President Donald Trump mentioning the company by name on Tuesday evening, noting that the government is funding Kodak with a $765 million loan under the Defense Production Act.

Chairman's Stock Purchase: While the stock's reaction to the news is understandable, its 25% gain on Monday ahead of the public announcement has raised some eyebrows on Wall Street. Kodak Chairman Jim Continenza has also taken some head for buying 46,737 shares of Kodak stock on June 23 at an average price of $2.22.

Roughly a month later, that $103,575 investment is now worth more than $1.5 million.

"We're here to make continued KSMs and APIs and help fight the pharmaceutical blockage in the U.S. and the lack of supply. So we're really here for the right reasons, and I don't speculate on the stock price," Continenza told Fox Business on Wednesday morning.

Follows A Pattern: Continenza's June purchase was certainly well-timed, but neither he nor any other Kodak insider has disclosed purchases of stock since Monday. In addition, Continenza has regularly purchased shares of Kodak since August of last year. After buying 100,000 shares in August 2019, Continenza bought 53,263 shares in November and 50,000 shares in March.

The June purchase was seemingly neither unusually large nor unusually timed based on this pattern.

See Also: Why You Should Pay Attention To Insider Transactions

The Plot Thickens: Continenza's lack of direct involvement doesn't dismiss Monday's huge move on heavy volume ahead of the news.

Rochester local CBS news affiliate WROC-TV reported a story with the headline "Kodak, US Government To Unveil A New Manufacturing Initiative In Response To COVID-19 Pandemic" on Monday, July 27 at 11:56 a.m. ET, according to a cached version of the story. The original story has been taken down.

The official press release addressing the news was issued on Tuesday.

Pivot To Drugs: "[W]hen the pandemic hit -- we -- what can we do? We started making hand sanitizer," Continenza said on Fox Business. "We started making face shields, and then we started doing printed circuit board for ventilators, and that kind of got us within the context of how can we help with this pandemic.

"And we were working another partner who was working on this with the government and we were just there making them for this particular partner; and that kind of got the introduction. Meanwhile the government was looking at who can make these inside of Dr. Navarro's group and Kodak was on their list. So the two things kind of met and married."

Benzinga's Take: Regardless of whether or not company management profited off of the leak, it''s clear this information made it out to somebody on Monday and triggered heavy buying activity in the stock.

Traders who got in early on the big move have made a killing on Kodak this week, but the company's questionable moves from cameras to blockchain technology to generic drug ingredients in a matter of years make it a risky bet at this point up nearly 1,500% in three days.

© 2020 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.

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