We were watching this stock since Monday from Kodak’s announcement of tapping $160m of a $400m credit facility.
Kodak market capitalization lost more than a quarter of its value this day due to investors fear of Kodak’s diminishing cash flow.
On the next day, Moody’s lowered Kodak’s rating one notch to Caa2, eight steps below investment grade. Moody’s outlook remains negative based on its view that Kodak’s liquidity position will likely weaken in the immediate term:
“We anticipate that Kodak will consume cash over the next year, thus weakening its liquidity profile”.
EK shares traded sideways for a few more days and… Friday, fear of bankruptcy:
- Bloomberg reported that Kodak was weighing options including a bankruptcy filing because of concerns raised by possible bidders for its patent portfolio.
- The Wall Street Journal reported that the company has hired Jones Day, a law firm that dispenses advice on bankruptcies and other restructuring alternatives.
This chain of events convinced some investors that Kodak is running out of cash and latent bankruptcy is just around the corner. EK stock immediately went south with an accelerated speed. This was a “haven” signal for day trader:
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Kodak issued a statement after the market closed on Friday, where it said:
“Kodak is committed to meeting all of its obligations and has no intention of filing for bankruptcy.”
EK shares rose 30% to $1.02 in after-hours trading on the news.