Markets

Why Kodak Stock Plunged Today

What happened 

Shares of Eastman Kodak (NYSE: KODK) plummeted on Friday after rising as much as 28 times in value earlier in the week. By the close of trading, Kodak's stock was down 27%.

So what

Eastman Kodak shares surged on Tuesday and Wednesday after the company said it would receive a $765 million Defense Production Act loan to produce coronavirus-related pharmaceutical ingredients. Traders bid up Kodak's shares from a closing price of $2.10 on Friday, July 24, to as high as $60 on Wednesday.

A chart that rises then falls, with a section that continues to rise erased.

Eastman Kodak's stock pulled back sharply on Friday. Image source: Getty Images.

Since that time, critics have questioned why the Trump administration awarded the loan to Kodak, which is still primarily a technology company, rather than giving it to a pharmaceutical company. Skeptics have also questioned the unusual trading activity in Kodak's shares prior to the announcement of the loan, and whether the information was leaked or traded upon by insiders. 

Now what

Kodak's incredible rise was shocking. But after its amazing gains, there should be little surprise that traders are taking profits. Many investors believe Kodak's shares went too far too fast, and some short-sellers are even betting against Kodak's stock. 

Investors should expect Kodak's shares to remain extremely volatile in the days ahead.

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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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