Why Kodak Stock Popped Today

What happened

Shares of Eastman Kodak (NYSE:KODK) surged as much as 46.2% on Thursday before pulling back and ending the trading day up 16.3%. The sharp upward move came immediately after CEO Jim Continenza tweeted about Kodak’s partnership with Microsoft (NASDAQ:MSFT)

So what 

An announcement of a major new deal with Microsoft would certainly be exciting news for Kodak’s investors. A big-time collaboration with the tech titan would likely bring new revenue and profit opportunities for Kodak, which could surely use them.

A stock chart that rises sharply and then begins to fall.

Image source: Getty Images.

Unfortunately, Continenza’s somewhat confusing tweet was actually regarding a partnership Kodak previously announced back in December. Although Kodak is collaborating with Microsoft to build a suite of printer software solutions, investors had already written off the deal as unlikely to have much of an impact on its long-term business prospects. The pullback in Kodak’s stock price later in the trading day likely came about as more traders began to realize this.

Now what 

Kodak has had more than its fair share of kerfuffles with investor communications. After Kodak’s share price soared in late July when it was awarded a $765 million Defense Production Act loan intended to help it launch a new pharmaceutical supply business, the Securities and Exchange Commission launched an investigation into whether the company improperly disclosed information to investors. The SEC also examined whether Kodak’s executives illegally profited from stock options that were granted to them one day before the loan was announced. 

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Although regulators reportedly found no wrongdoing on the part of Kodak or its management team, the incident left a bad taste in the mouths of many investors. Moreover, Kodak continues to face formidable challenges in its core printing business, and its hopes of becoming a serious player in the pharmaceutical supply industry are questionable at best. Thus, shareholders who benefited from today’s gains in Kodak’s stock price might want to consider taking profits.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

View more information: https://www.fool.com/investing/2021/02/03/why-kodak-stock-popped-today/

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