Eastman Kodak Co (KODK) stocks soared by 2,189% in just two days after the company announced on Tuesday, that it has secured a loan of $765 million from the U.S government to produce generic-drug ingredients in the U.S, in response to the coronavirus pandemic.
The US International Development Finance Corporation will lend the cash to Kodak under the Defense Production Act, which requires companies to accept and prioritize government contracts for national security and other reasons.
Following the Tuesday morning announcement, shares of the Rochester, New York-based company more than tripled on Tuesday, then jumped as much as 570% on Wednesday as Robinhood traders garner interest on the stock. The share of Kodak was $2.62 per share at close of trade on Monday
On Wednesday, the share price rose as high $59.98 per share with day low of $17.50 per share. However, at the close of trading, it lost most of its gains to close at $33.20 per share to retain only 318.14% rise.
Before the announcement of Kodak’s loan on Tuesday, the shares of the company were held by about 9,300 Robinhood traders. This number skyrocketed to over 72,000 by Wednesday afternoon, with half of the increase happening under 2 hours, according to Robintrack.net.
In line with the rise in the share price, Kodak’s market valuation also rose to more than $1 billion. The company was valued at $115 million prior to Tuesday announcement.
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According to Kodak, it plans to establish a pharmaceutical division with the loan, which will focus on making essential drug components that is in “chronic national shortage” as defined by the Food and Drug Administration. The company CEO CEO Jim Continenza said that, the pharmaceutical ingredients could account for 30% to 40% of its business.
Kodak started producing hand sanitizer, face shields and circuit boards for ventilators during the COVID-19 pandemic.
In a press briefing on Tuesday, President Trump described the Kodak agreement as “one of the most important deals in the history of US pharmaceutical industries.”
Kodak which once dominated the photographic-film market filed for bankruptcy in 2012 following the emergence digital camera, which rendered many of its products obsolete.
In 2019, Kodak’s revenues fell 6% to $1.2 billion with pre-tax loss to $60 million.
Wednesday’s trading volume in the stock was “outrageous” compared with the usual activity said MarketRebellion co-founder Pete Najarian. He said that 122 million shares have already been traded Wednesday, following 272 million shares exchanging hands on Tuesday. The daily average trading volume of Kodak was 125,000 prior to the announcement. According to him, the stock is in the top five in terms of volume in the options market, with activity 6,000% above normal.
This is not the first time Kodak will venture into pharmaceuticals, it previously developed nonprescription drugs before selling its Sterling Winthrop business unit to British drugmaker SmithKline Beechman for $2.93 billion in 1994.
Written by;
Ifunanya Ikueze
