- The Trump administration's plans to give Eastman Kodak $765 million are on hold, after questions of insider trading were raised regarding the company's disclosure of the government loan to manufacture drugs at its U.S. factories.
- Loan negotiations with Kodak, once a dominant film and camera maker, will not proceed "unless these allegations are cleared," the U.S. International Development Finance Corporation, which is handling the loan, tweeted Friday evening.
- Kodak and the IDFC on July 28 announced the signing of a letter of interest, setting the stage for Kodak to receive the government funds following an agency review. A day before, on July 27, four Kodak executives were granted stock options worth potentially millions of dollars. The timing of those awards drew immediate scrutiny from lawmakers and, reportedly, the Securities and Exchange Commission.
Shares in Kodak surged by nearly 1,200% following the loan's disclosure, rising from a price of $2.62 per share at the end of the day on July 27 to more than $33 a piece at market close on July 29.
The dramatic 48-hour swing made the new options held by top company executives, including CEO James Continenza, chief financial officer David Bullwinkle and two others, potentially worth tens of millions of dollars.
Several powerful lawmakers, including Sen. Elizabeth Warren, D-Mass., and Rep. Maxine Waters, D-Calif., are now demanding answers on those trades. Warren called for an SEC investigation, which is now in early stages, according to The Wall Street Journal.
How the company revealed the loan is also in question, as local media in Kodak's hometown of Rochester, New York, reported the agreement before it was formally announced by the IDFC. SEC regulations govern the disclosure to investors of events that are significant to a company's business.
On Friday, Kodak said it would appoint a special committee and work with an outside law firm to review the events in question. News of the loan's suspension sent shares in down by nearly one-third on Monday.
Kodak is an unusual choice for a high-dollar government investment in domestic drug manufacturing. The camera maker, which filed for bankruptcy in 2012, does produce fine chemicals, but it's not clear exactly how large of a part it actually plays in the company's business.
Making drug ingredients and finished drug product, as the loan is meant to help Kodak do, presents different challenges, not least of which are more stringent regulatory rules.
The Trump administration, however, has made developing U.S.-based drug manufacturing a priority, spurred into urgency by the supply chain stresses brought on by the coronavirus pandemic. In addition to its Kodak plans, the government has channeled hundreds of millions of dollars into funding manufacturing related to COVID-19 drugs and vaccines.
Last week, President Donald Trump signed an executive order to require government agencies to preferentially purchase medicines which were made in the U.S., while encouraging further investment in domestic drug production.