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Why Eastman Kodak Stock Is Up Another 5% Today

By Rich Smith – Sep 18, 2020 at 12:36PM

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The company's lawyers say it is innocent. Congress isn't so sure.

What happened

Shares of Eastman Kodak (KODK 0.36%) are continuing their incredible run, aiming to end the week on a high note. As of 11:30 a.m. Friday, the stock was up another 5%, for a total of about 75% since the week began!

Capital Dome in Washington, D.C.

Image source: Getty Images.

So what

Kodak sparked this rally when on Wednesday, lawyers whom it had hired to investigate irregularities surrounding its $765 million U.S. government loan concluded (shocker!) that the company had done nothing wrong.

Hopes that this conclusion will put the controversy to bed, and enable the stock to regain the $33 share price it reached in July, appear to be at the heart of today's continued stock gains. There's just one problem with that theory, though.

Now what

Even if Kodak has cleared itself of all charges, the federal government has not. The U.S. International Development Finance Corp. (IDFC) is still reviewing circumstances surrounding its controversial July loan. The Securities and Exchange Commission is still looking into the matter, too, as are several Congressional committees.  

Just yesterday, CNBC confirmed that House lawmakers are questioning the findings of Kodak's special committee, complaining that "the report from Kodak's lawyers raises more questions than it answers about the Trump Administration's efforts to provide the company a $765 million loan to produce pharmaceutical ingredients despite Kodak's lack of experience in the field."  

More ominously, they warned investors: "Let's be clear: This report does not represent the findings of any regulator. It is a report generated by a law firm hired by Kodak."

In short, despite what the stock price might indicate, Eastman Kodak is not out of the woods yet, and investors buying into today's rally may be jumping the gun.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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