Younger generations may not remember the phrase “Kodak moment,” but plenty of them will now recognize the brand and company name thanks to the Reddit meme stock leaders.
When George Eastman started the company in the 1880s, he had a vision of making photography “as convenient as the pencil.” His first simple camera and photo technology made photography accessible to the masses.
However, the Eastman Kodak Company (NYSE:KODK) hasn’t had the photography market cornered in quite a few years, largely thanks to the advent of digital photography. Company revenues have been declining since at least 2015, and in the summer of 2020, Kodak saw a brief but huge surge in its stock prices. Here’s more about how Kodak joined the ranks of meme stock companies.
- Eastman Kodak Company has been considered somewhat of a lost cause since they failed to adapt successfully to digital photography trends.
- A low point for the company was its 2012 filing for Chapter 11 bankruptcy protection. A major company overhaul enabled Kodak to emerge from bankruptcy in 2013.
- During the coronavirus pandemic, Kodak struck a deal with the Trump administration to produce pharmaceutical ingredients as part of the Defense Protection Act.
- Kodak received a $765 million loan for that process, and KODK shares surged 1,382.14% over the course of July 2020.
- In June of 2021, the New York Attorney General secured a court order for Kodak CEO James Continenza to testify regarding alleged insider trading during the summer of 2020.
Why did Kodak become a meme stock?
Kodak’s market volatility is largely traceable to the announcement that the company would begin manufacturing drug ingredients instead of focusing on photography. With COVID-19 on everyone’s minds and no vaccine ready for the market yet, investors may have been incentivized by the idea that Kodak could be a key player in ending the pandemic.
Kodak shares saw incredible price increases for a brief period last summer, helping secure its place among the meme stocks.
Results of the KODK meme stock popularity
While most meme stocks of 2021 have surged upon high social media interest without regard for company fundamentals, Kodak is a different case. Their biggest price surge occurred last summer just after the news broke of their government loan to develop COVID-19 drug materials.
Kodak shares skyrocketed after investors learned the company would pivot from photography to pharmaceuticals, then dropped promptly when the rumors of insider trading began to surface. The stock’s volatility seems more tied to the company’s news and developments, rather than mere market speculation.
When was Kodak’s stock trading halted?
As often occurs due to unusual levels of stock volatility, trading of Kodak shares was halted multiple times in July 2020.
KODK trades on the NYSE, and during the July 29, 2020 trading session, prices triggered twenty trading halts on the stock. The halts were “circuit breakers,” or pauses in trading intended to slow down the market, offering investors a chance to catch up on new information.
Circuit breakers can apply to broad market indices, such as the S&P 500. They may also affect individual securities, as in the case of Kodak, and can be caused by massive increases or decreases in stock price.
A few weeks later, on August 18, Kodak again was halted, this time a total of five times in intraday trading. Share prices had been in a seven-day decline and then spiked by as much as 79%, to $13.65 apiece, followed by another major drop to less than $10.
What to expect from KODK in the future
Kodak’s photography business faltered in the 2000s. Revenues have declined at an alarming rate, along with EBITDA.
- Revenue for Kodak’s printing division declined by 23% from 2019 to 2020.
- Digital printing sales declined by 22%.
- Sales for advanced materials and chemicals dropped by 16%.
- Brand division sales also declined by 8%.
Another troubling statistic is Kodak’s shift from profit to loss between 2019 and 2020: In 2019 the company had a net profit of $116 million, but by 2020, they recorded net losses of $541 million.
The investigation into possible insider trading by the Kodak CEO may continue to impact their success on the market.
The stock market is largely unpredictable, but meme stocks take that notion to a whole new level. In the past year, Kodak shares have gained 278%—not a bad return on investment, but only if you purchased at the right time. While the WallStreetBets crowd tends to focus on a certain type of company, the next meme stock depends on how well the trend catches on. Will the stock really take off, and how long will the spike last? For KODK stock, investors haven’t given up yet.