The SEC is investigating Kodaks recent 2,190% stock spike following Elizabeth Warrens calls for action

Reuters / Steve Marcus

• The Securities and Exchange Commission is investigating trading of Eastman Kodak shares before the public announcement of a $765 million government loan to make drug ingredients, The Wall Street Journal reported on Tuesday.
• Kodak shares spiked as much as 2,190% in the two days following the announcement, yet it also gained as much as 26% the day before information of the loan was made publicly available. 
• Warren urged the SEC in a Monday letter to probe individuals and corporate entities making large trades of Kodak stock before the July 28 announcement, as well as whether anyone inside Kodak shared information on the loan before it was made public.
• “This is just the latest example of unusual trading activity involving a major Trump administration decision,” Warren wrote in the letter dated Monday.
• Watch Kodak stock trade live here.

The Securities and Exchange Commission is probing the trading of Eastman Kodak stock after its price surged on news of a $765 million government loan, The Wall Street Journal reported Tuesday afternoon.

The loan, meant to aid Kodak in producing drug ingredients to fight coronavirus, was publicly announced on July 28. Following the announcement, Kodak stock leaped as much as 350%. Shares soared even higher on July 29, at once point reaching a two-day gain of 2,190%.

Yet the stock gained as much as 26% on the day before the announcement, raising questions as to whether insiders traded on information of the government loan.

The investigation is at an early stage and it’s unclear whether allegations of wrongdoing will be raised, a source told The Journal. The agency is looking into how Kodak handled the disclosure of the government loan.

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Sen. Elizabeth Warren called on the agency to probe “several instances of unusual trading activity prior to the announcement of this deal” in a letter dated Monday.

“This is just the latest example of unusual trading activity involving a major Trump administration decision,” Warren wrote. The senator cited past letters regarding possible insider trading of defense stocks and commodities before administration attacks in Iran.

The Massachusetts Democrat noted the rally could have originated from the premature publication of the government loan. The Wall Street Journal reported on July 29 that stories and tweets from TV stations in Kodak’s hometown of Rochester, NY possibly alerted traders to the news. Kodak’s trading volume reached 1.6 million shares by the end of the day, well above the average daily volume of 231,000 over the previous month.

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Warren asked the SEC to look into individuals and corporate entities making large trades of Kodak stock before the July 28 announcement, the extent to which such parties were privy to nonpublic information, and whether they shared information on the loan. The agency should also probe whether Kodak complied with relevant disclosure requirements after early reports announced the deal.

Kodak traded at $15.38 per share as of 12:17 p.m. ET Tuesday, up 273% year-to-date.

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