The Real Reason Kodak’s Stock Exploded Before the Official Loan Announcement

Democrats launched an investigation into the $765 million loan to Kodak amid allegations of insider trading. The allegations surfaced after a massive spike in stock buying the day before the official announcement.

In response, Elizabeth Warren wants the SEC to explore:

“The extent that the individuals who traded in Kodak stock were privy to any nonpublic information, how and from whom did they obtain this information? Did any individuals with knowledge of the loan deliberately or inadvertently share information with anyone inside or outside of Kodak who was not authorized to have the information?”

Yet, no form 4 filings have been filed. So it’s unlikely any corporate insiders benefited directly. Also, no evidence has surfaced of friends and family of corporate insiders benefiting.

Q: So why did so many people buy Kodak stock the day before the official announcement?
A: Because the media leaked the news story.

It appears that News 8 (WROC) in Rochester Tweeted and published a story about the Kodak deal one day before the official announcement. Day traders spread the market changing news amongst themselves.

Here is an archived screen capture of the story that appeared here (Note: The article has since been deleted). The timestamp is “Jul 27, 2020 / 11:56 AM EDT.” Also, @AdamChodak tweeted about the ‘big announcement.’ His ‘big announcement’ tweet has since been deleted. The official announcement occurred on the 28th, after regular trading hours.

Screen capture of the market changing Kodak article published on July 27, 2020 at 11:56 AM EDT.

Bottom line: It appears the media made a mistake and published the market changing article early. Day traders capitalized on this mistake.

NOTE: When WROC News 8 published the big Kodak announcement story (1st vertical blue line), no meaningful change in price or volume had occurred. The official announcement came a day later (2nd vertical blue line).

You would gloat like this if you bought Kodak at $2.50/share:


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TIP: We think the loan will eventually clear all hurdles because: 1) there have been no form 4 filings recently, and 2) this news was widely available the day before the announcement, which is the likely cause of the volume spike. We’d buy on the current 40% dip.

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Disclaimer: This article represents the author’s opinion and should not be considered investment or trading advice. Unless otherwise noted, the author has no position in any of the stocks mentioned.

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