What happened
Shares of Eastman Kodak (KODK +3.31%) more than tripled on Tuesday, following news that the technology company would receive a $765 million loan from the U.S. government to produce vital coronavirus-related pharmaceutical components.
So what
Eastman Kodak will use the funds to launch Kodak Pharmaceuticals, a new division that will produce pharmaceutical ingredients deemed critical by the U.S. Department of Defense (DOD) and the Food and Drug Administration (FDA). The funds will be issued by the U.S. International Development Finance Corporation (DFC) at the direction of President Donald Trump under the Defense Production Act (DPA).
Eastman Kodak's stock soared after it received a game-changing investment from the U.S. government. Image source: Getty Images.
The move is intended to bolster the nation's stockpile of drugs that are in short supply during the coronavirus pandemic, as well as reduce the country's reliance on foreign manufacturers. "This is about assuring our supply chains now and in the future," White House Supply Chain Task Force Lead John Polowczyk said in a press release.
Now what
The money will serve as a lifeline for Kodak, which has struggled to adapt to the shift to digital photography. Once a titan of American industry, Kodak was forced into bankruptcy in 2012. It emerged from bankruptcy in late 2013 with a new focus on commercial printing, but its share price would go on to fall more than 85% prior to today. Even after today's gains, Kodak's stock is still down 60% since reentering the public markets.
The $765 million loan and supply agreement with the U.S. government is certainly a game-changer for Kodak, which had a market capitalization of only $115 million prior to today. With its market cap growing by over $230 million on the news, investors are expecting this deal to be a major new driver of revenue and profit growth for the company.
