Why Kodak Stock Plummeted Today

What happened

Shares of Eastman Kodak (NYSE: KODK) plunged on Monday, as the volatile small-cap stock surrendered much of its recent gains. As of 3:35 p.m. EDT, Kodak's stock price was down more than 30%.

So what 

Following news that it had secured a $765 million Defense Production Act loan to produce COVID-related pharmaceutical components, Eastman Kodak's shares soared as much as 2,757%. From its closing price of $2.10 on July 24, Kodak's stock price hit a high of $60 on July 29.  A stock chart that rises sharply and then falls.

Eastman Kodak's stock was down sharply on Monday. Image source: Getty Images.

Kodak's stock, however, has pulled back violently since then. With its shares currently trading for about $15, Kodak has shed roughly three-quarters of its value from its recent highs.

Now what 

Questions are swirling as to why Kodak, which is primarily a technology company, was chosen to receive a loan related to pharmaceutical supplies, rather than a company with more experience in the field. Kodak's board of directors also made the questionable decision to grant executive chairman Jim Continenza options for 1.75 million shares of stock just before the deal was announced. Additionally, Kodak's convertible debtholders have chosen to convert their bonds into stock, which, while helping to strengthen the company's balance sheet, is diluting existing shareholders. 

In light of these factors, most investors would likely be best served by staying clear of Eastman Kodak's stock.

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Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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