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The Securities and Exchange Commission is investigating Eastman Kodak‘s disclosure about getting awarded a $765 million loan from the U.S. government to start producing drug ingredients, which sent the stock up on heavy volume ahead of the official announcement, the Wall Street Journal reported Tuesday.
On July 27, a day before Kodak, as well as President Donald Trump, announced the deal to produce ingredients in generic drugs in response to the coronavirus pandemic, shares of the film pioneer soared nearly 25% with trading volumes far exceeding those in previous sessions.
The SEC’s probe, which is still at an early stage, is focused on how Kodak disclosed the deal with the government, the Journal reported, citing people familiar with the matter.
The Journal previously reported that Kodak had released information about the loan to local reporters in Rochester on July 27 with no embargo time on the news advisory. Several news outlets published related stories and then deleted them upon Kodak’s request.
“The company’s internal communications team did not intend for the news to be published by the outlet in question,” a Kodak spokesperson told CNBC.
Sen. Elizabeth Warren on Tuesday had called on the SEC to look into trading that occurred prior to the Trump administration’s public announcement of the deal with Kodak.
“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 Warren in an open letter.
On the Warren statements, the Kodak spokesperson said, “the company intends to fully cooperate with any potential inquiries.”
James Continenza, Eastman Kodak executive chairman, told CNBC last week he’s not aware of what caused the volatility in the stock ahead of the announcement.
“I mean obviously this has been a pretty tight kept secret even until the last day,” he said on CNBC’s “Squawk Box” on Wednesday. “I couldn’t tell you what influenced that [the volume] or didn’t … we knew for over a week.”
Shares of Kodak rallied more than 300% on July 28 after the official statement came out. Volatility was so wild that trading was halted for 20 times during that day.
The stock also gathered massive interest from retail investors, making the most popular stock on the millennial-favored trading app Robinhood at one point last week. Shares soared 940% last week, and they dipped more than 30% this week so far.
Kodak shares fell 7% on Tuesday.
— Click here to read the original Wall Street Journal story; CNBC’s Pippa Stevens contributed reporting.
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