Kodak Shares Plummet as Government Withholds Loan

Kodak shares plummeted almost 28% on Monday following an announcement made by a federal agency to suspend the $765 million loan that was supposed to be given to the former film company to produce COVID-19 treatment. The loan will remain on hold pending on the findings of the ongoing investigations of wrongdoing.

In a tweet on Friday, the International Development Finance Corporation said that “recent allegations of wrongdoing raise serious concerns. We will not proceed any further unless these allegations are cleared.” The US Congress and Securities and Exchange Commission are currently investigating the deal. Kodak’s board also said on Friday that it was also reviewing the loan disclosure.

Following the announcement Kodak’s stock plunged as much as 43% before it was briefly suspended because of excessive volatility, closing down to 27.89% at $10.73.

Since the Development Bank loan was officially announced on July 28, 2020, Kodak has seen drastic moves in its share price. Investigations of the SEC on Kodak involves the possibility of the company breaking the law by informing some news outlets about the loan before informing its investors.

House Democrats have also questioned why a development bank would “support Kodak, an organization that was on the brink of failure in 2012 and was unsuccessful in its previous foray into pharmaceutical manufacturing.” Democratic Rep. Jim Clyburn said he was “pleased” with the Trump administration for putting the loan on hold.

“Given that the administration admitted there are ‘serious concerns’ with the loan and said they ‘will not proceed any further unless these allegations are cleared,’ I expect both the administration and the company will fully comply with the committees’ document requests without delay,” Clyburn said.

The development bank granting Kodak the loan was the first of its kind to be created under the Defense Production Act in collaboration with the US Department of Defense. The development bank was created to speed up production of drugs that were in short supply especially those related to critical cases like the COVID-19. The development bank loan was an initiative of the Trump administration to encourage and rebuild the US pharmaceutical industry.