The Securities and Exchange Commission (SEC) is reportedly investigating the circumstances around Eastman Kodak’s announcement of a $765 million government loan to manufacture drugs at factories in the U.S.
The Wall Street Journal reported that the investigation is at an early stage and might not produce allegations of wrongdoing, but it focuses on how Kodak controlled the loan’s disclosure. The price of stocks spiked briefly, producing a windfall for some company executives who owned stock-option grants.
|KODK||EASTMAN KODAK CO.||7.36||+0.07||+0.96%|
The loan means that Kodak Pharmaceuticals will make critical pharmaceutical ingredients that have been identified by the Food and Drug Administration as essential but that have lapsed into chronic national shortage. The government loan will help support startup costs needed to repurpose and expand Kodak’s existing facilities in Rochester, N.Y., and St. Paul, Minn.
The Journal had previously reported that Kodak had shared information with media outlets about an agreement between the company and the Trump administration. Some outlets published it before deleting it.
TV stations in Rochester published stories on July 27 after Kodak sent an advisory to media companies that didn’t restrict outlets from disseminating the news, the outlet said. Trading volume then surged and its stock prices rose.
A Kodak spokeswoman told the outlet that the company’s internal communications team “did not intend for the news to be published by the outlet in question" and that the company later asked reporters to remove the information.
The reported investigation comes a day after Sen. Elizabeth Warren, D-Mass., asked the SEC to investigate the circumstances surrounding the deal.
“There were several instances of unusual trading activity prior to the announcement of this deal, raising questions about whether one or more individuals may have engaged in insider trading or in the unauthorized disclosure of material, nonpublic information regarding the forthcoming loan awarded under the Defense Production Act,” she wrote.
She called it "just the latest example of unusual trading activity involving a major Trump administration decision."
The Associated Press contributed to this report.