Shares of Eastman Kodak (NYSE:KODK) rose as much as 19.7% on Tuesday before declining and ending the day down 3.6%. The volatile small-cap stock gave up its gains following reports of a Securities and Exchange Commission probe into the company.
The SEC is launching an investigation into Kodak's disclosures related to its $765 million Defense Production Act loan, which ignited a massive surge in its stock price, according to The Wall Street Journal. Kodak's shares rose as much as 28 times in value after news of the loan broke.
The probe comes after Sen. Elizabeth Warren, the Massachusetts Democrat, sent a letter urging the SEC to investigate potential incidents of insider trading prior to the public announcement of the loan.
The fact that Kodak's trading volume soared and its share price surged by nearly 25% on July 27 -- the day before the loan was officially announced -- is certainly questionable. What's as yet unknown is if any company insiders wrongfully disclosed or traded upon nonpublic information.
With the SEC's investigation just getting underway, investors may want to avoid Kodak's stock until the company is cleared of any potential wrongdoing.