Tweets and articles sent Kodak shares surging before official announcement of government loan
Early activity was suspicious to some traders
A day before Eastman Kodak Co. received a $765 million loan from the U.S. government, shares of the onetime photography giant were already on the move.
On Tuesday morning, The Wall Street Journal reported that Kodak would receive a U.S. loan to produce drug ingredients. The news, officially announced by the company and Trump administration on Tuesday afternoon, more than tripled the value of the company's stock.
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But less than a day before the announcement, the stock was already moving higher on heavy volume. More than 1.6 million shares of Kodak were traded on Monday, a big jump from an average daily volume of 231,000 shares a day during the previous 30 trading days. The stock price gained 25% that day.
The early activity was suspicious to some traders. It came well ahead of the announcement the next day. But some market observers know why the Kodak stock moved early: tweets and news stories from television stations in Kodak's hometown of Rochester, N.Y. Some of those tweets and stories were quickly deleted.
This Jan. 25, 2011, file photo shows a Kodak slide projector in Philadelphia. (AP Photo/Matt Rourke, File)
Just after noon on Monday, two news reporters in Rochester tweeted information about a Kodak initiative with the government in response to the coronavirus pandemic. One reporter has since deleted the tweet, the other has kept it up. The tweet that remains up has a time stamp of 12:05 p.m. ET.
At about the same time, news stories were posted on the websites of the ABC and CBS affiliates in Rochester. The news stories were initially published on Monday after Kodak sent an advisory to media outlets about the initiative, according to Chuck Samuels, general manager of the ABC affiliate. The advisory didn't indicate that the information wasn't supposed to be released publicly, he said.
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A copy of it reviewed by The Wall Street Journal confirmed there was no embargo time on the news advisory.
The CBS affiliate's story was published at 12:12 p.m. ET. In the now removed story, a Kodak spokesperson was quoted as saying the initiative "could change the course of history for Rochester and the American people," according to a copy of the article reviewed by The Wall Street Journal that was collected by Meltwater, a global media intelligence company.
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Both stories were then removed from their respective websites after Kodak told the stations that the information was for "background only" and not for publication.
A representative for the CBS affiliate declined to comment.
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| KODK | EASTMAN KODAK CO. | 6.99 | -0.26 | -3.56% |
A Kodak spokesman said the company sent the advisory to journalists in Rochester on Monday morning. The spokesman confirmed the company asked the reporters to remove the information after they posted it.
Following the tweets and news stories, activity in Kodak's stock spiked, trading data shows. In the hour from 12:30 to 1:30 p.m. ET on Monday, Kodak trading volume surged and the price of its shares rose from $2.22 to $2.41, a jump of more than 8%.
Trading in Kodak options also surged on Monday, rising to about 20 times normal levels, with a noticeable spike just before 1 p.m. ET, according to Henry Schwartz, founder of data provider Trade Alert. There was more than three times as much volume in Kodak call options, which can be used to place bullish bets on the company's stock, than in bearish put options, he added.
The trading on Monday is just one part of a larger move in Kodak stock.
This week alone, the company's stock has risen to as high as $60 a share at one point from around $2 last week. On Monday, the stock closed with a market capitalization of $114.6 million. That valuation rose to above $2 billion on Wednesday.
On Wednesday, Kodak shares closed at $33.20, their highest closing value since 2014.
This is a notable increase for a company that has struggled to reinvent itself since its 2012 bankruptcy filing. Shifts in Kodak's business model have caused price spikes before. In 2018, shares more than doubled after the company waded into the digital-currency world with plans to launch an initial coin offering.
The stock move on Monday related to the deleted tweets and news stories is one result from increased market surveillance of social media. Many investing firms use computer algorithms to scan information streams -- including those from news, Twitter and other social media -- to make buy or sell decisions in fractions of an instant.
Traders John Romolo, left, and Leon Montana work on the NYSE trading floor on Friday, March 20, 2020. (Nicole Pereira/NYSE via AP)
Other firms hire third-party companies to do this scanning for them. Companies like Dataminr look at dozens of variables about each tweet, such as the influence of the user, the geolocation of where the tweet is sent from, and how tweets are clustered together. They then send alerts to their customers.
The technology has been around for several years, but it is increasingly used by hedge funds, investment banks and even long-term investors such as mutual-fund companies.
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Meanwhile, stocks can also spike in value after being plugged in online forums that are popular with individual investors using zero-commission investing apps like Robinhood.
"As soon as a journalist shares news, or an article is published online, social media responds very quickly. One article being shared thousands of times on social is commonplace, and even if content is deleted, the damage may be done," said Meltwater Chief Executive Niklas de Besche.