What happened

Shares of Eastman Kodak (NYSE:KODK) tumbled by as much as 41% right out of the gate Monday morning on sky-high volume. The company's shares are plummeting this morning in response to the news that the U.S. International Development Finance Corporation (DFC) will reportedly pause a $765 million loan agreement due to allegations of insider trading.

On July 28, Kodak announced that the DFC signed a letter of intent in regard to this loan in an effort to boost generic-drug manufacturing capacity within the United States. If the company's executives aren't cleared of these allegations, however, this transformational loan agreement may go up in smoke. 

A man with a look of shock on his face standing in front of a graph illustrating a downward trend

Image source: Getty Images.

Kodak's shares have rebounded to some degree since the opening bell, but they are still down by a noteworthy 30.5% as of 9:54 a.m. EDT.  

So what

Kodak's shares jumped by 25% the Monday before this loan agreement was officially announced, prompting an investigation into insider trading from the Securities and Exchange Commission. However, this case could get messy quite quickly.

After all, some local media outlets leaked the terms of the deal before they were supposed to. So there's a real chance that this unusual spike in Kodak's share price will turn out to be nothing more than retail investors getting wind of the deal prior to an actual press release. Time will tell.     

Now what

Should bargain hunters pounce on this stock in the wake of these hefty dip? Unfortunately, the answer is a solid no. Kodak's shares were trading at under $2 not all that long ago, and they could quickly return to that area if this loan does indeed fall apart. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.