SEC investigating Kodak for potential insider trading after $765M federal loan announcement, report says

Washington

WASHINGTON (WROC) — Eastman Kodak Co. is being investigated by the United States Securities and Exchange Commission (SEC) for potential insider trading in connection to last week’s federal deal that sent stocks soaring.

The Wall Street Journal reported Tuesday afternoon that the SEC was investigating Kodak loan disclosure and the recent stock surge. That followed a letter from Sen. Elizabeth Warren (D-Mass) to the SEC Monday which called for an investigation into potential insider trading that occurred before last week’s announcement in which Eastman Kodak Co. would receive a $765 million federal loan to produce generic drug ingredients.

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“There were several instances of unusual trading activity prior to the announcement, raising questions about whether one or more individuals may have engaged in insider trading or in the unauthorized disclosure of material, nonpublic information regarding the forthcoming $765 million loan awarded under the Defense Production Act,” wrote Sen. Warren (full letter below).

Warren’s letter cites analysis that there was an unusual trading pattern in Kodak stock that began prior to the public announcement of the deal.

“The day before the public announcement, trading volume in Kodak stock was almost eight times higher than the daily average and the company’s stock rose approximately 20 percent. On the day the deal was officially announced, the stock rose by over 200 percent – and the day after it rose by more than 300 percent. Individuals who purchased the stock prior to the announcement earned an extraordinary return,” the letter said.

MORE | Kodak stock soars after $765M federal loan announcement on pharmaceutical manufacturing

Additionally, Warren question the purchase of new shares in the company last month by Kodak Chairman Jim Continenza, ahead of the public announcement. Kodak officials

“The purchase of stock by Mr. Continenza and Mr. Katz while the company was involved in secret negotiations with the government over a lucrative contract raises questions about whether these executives potentially made investment decisions based on material, non-public information, and whether that material, non-public information was potentially derived from their positions as executive chairman and board member respectively,” wrote Sen. Warren. 

Kodak officials defended the June stock purchase, saying in a statement to News 8 last week:

The stock purchases you refer to are a continuation of Jim Continenza’s ongoing, regular investments in Kodak and are in full compliance with regulatory guidelines for investment activity.  Since joining Kodak as Executive Chairman in February 2019, Mr. Continenza has purchased 650,000 shares of Kodak stock.  As reflected in Mr. Continenza’s SEC filing, the 46,737 shares purchased on June 23rd represent a very small portion of Mr. Continenza’s interest in the company. Mr. Continenza is Kodak’s largest individual shareholder and his consistent investments in Kodak reflects his continued belief in the potential of the company.

MORE | Adam Interviews Kodak CEO Jim Continenza

Specifically, Sen. Warren is asking the SEC to investigate:

  • Which individuals or corporate entities made the large trades in Kodak stock prior to the public announcement
  • If they were aware of any disclosure of nonpublic information that could have led to possible insider trading
  • To what extent they were privy to any nonpublic information and how they got it
  • If they deliberately or inadvertently shared information with anyone inside or outside of Kodak who was not authorized to have the information
  • If Kodak complied with all relevant requirements that the company promptly and fully disclose all information once there was a selective, inadvertent disclosure.

The Wall Street Journal reported Tuesday afternoon that the SEC was investigating Kodak loan disclosure and the recent stock surge.

Sen. Elizabeth Warren’s letter to SEC

SEC Form 4

Check back with News 8 WROC as we will continue to update this developing story.

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