[Asia Economy Reporter Jeong Hyunjin] The U.S. Securities and Exchange Commission (SEC) is investigating the stock price movements and circumstances surrounding Eastman Kodak's announcement at the end of last month that it would transform into a pharmaceutical company with support from the U.S. government, the Wall Street Journal (WSJ) reported on the 4th (local time), citing multiple sources.
On the 28th of last month, Kodak announced that it would launch "Kodak Pharmaceuticals" after receiving a loan of $765 million (approximately 920 billion KRW) from the U.S. International Development Finance Corporation (DFC). Until just before the announcement, Kodak's stock price was around $3, but it surged to the $50 range afterward, with trading volume also increasing significantly.
The SEC focused on the fact that the stock price had already surged by 25% on the 27th, the day before the loan announcement, and that executives holding company stock options benefited from this "unexpected windfall." The WSJ reported that some executives received stock options on the day before the announcement, when the stock price surged. The SEC is reportedly examining how Kodak managed the disclosure of the government loan announcement during this series of events.
News of Kodak's loan had been reported by some local media outlets the day before the official announcement. Although these media outlets withdrew their articles at Kodak's request, the news spread, causing the stock price to suddenly surge. These outlets claimed they reported the news because the explanatory materials provided by Kodak did not include a separate embargo notice.
Sources said the SEC investigation is still in its early stages and may not result in charges against the company or individuals. Kodak told the WSJ that it was unaware of the SEC investigation but expressed willingness to cooperate with it.
As suspicions arose, the U.S. Congress also called for a thorough investigation. Senator Elizabeth Warren (Democrat) sent a letter to the SEC on the same day, urging a thorough investigation into possible insider trading and leaks related to Kodak. She particularly expressed concern over stock purchases by Kodak executives last month during the period when Kodak was reportedly negotiating secretly with the Donald Trump administration.
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