Eastman Kodak (NYSE:KODK) has reinvented itself a number of times over the years. Its name has been synonymous with cameras, but it's transitioned into printing and at one point even got into cryptocurrencies with the launch of KodakCoin. Today, the ever-evolving company is eyeing the pharmaceutical industry. 

Investors got really excited about the stock in July, when the U.S. government announced it was giving the company a $765 million loan to help with the domestic production of drug ingredients. But the problem is that the stock started making big moves before the July 28 announcement, leading to accusations of insider trading. In an instant, the government's loan was put on hold. The company would go on to hire a legal firm, which concluded that Kodak wasn't in violation of any laws.

However, that doesn't mean that all is well again or that the stock is a safe buy. Here's why investors may want to think twice before investing in Kodak.

There are ongoing investigations

To help alleviate investors' concerns regarding allegations of insider trading, Kodak hired legal firm Akin Gump Strauss Hauer Feld LLP to review all of their trading information in an official assessment. The firm released its findings on Sept. 15, reporting that while there were governance issues, there weren't any related legal concerns. The stock would soar on the news, climbing from a closing price of $6.23 that day to a high of $12.51 a couple of days later on Sept. 18 -- nearly doubling in value. It's cooled off since then, falling to below $9, in part because investors realized this isn't really the news that Kodak needs.

Man looking at paper with magnifying glass

Image source: Getty Images.

The report by the firm, while potentially reassuring to investors, doesn't guarantee that regulators and lawmakers will reach the same conclusion (or that Kodak will get its loan from the government). The U.S. International Development Finance Corporation (DFC), which initially granted the loan to Kodak, is conducting its own investigation, as is the Securities and Exchange Commission (SEC). Congressional committees are also looking into the matter. These are the investigations that investors should focus on, as they'll determine the fate of Kodak and its loan -- which is what got investors so bullish about the company in the first place.

Bad news could send the stock crashing in a hurry

The danger for investors is that if the other investigations aren't as encouraging as the findings from Kodak's legal representatives, the massive rally the stock's been on this year could be undone. In 2020, while the S&P 500's been resilient but relatively flat, shares of Kodak are up 219%, and at one point, they were up over 900%.

KODK Chart

KODK data by YCharts

The danger with a stock like this is that it's very sensitive to news and developments. Prior to the July 28 announcement, shares of Kodak were trading between $2 and $3 for much of the year. If the possibility of its loan vanishes, Kodak's future in pharmaceuticals and its path forward will be thrown into question, potentially sending its shares crashing in the process.

Investors are stuck in a holding pattern at this point, waiting for the SEC's findings and a decision from the DFC, which are sure to have significant effects on the stock price.

Should you buy shares of Kodak today?

A volatile stock is not a safe one to be holding in your portfolio, and Kodak's more of a speculative buy than it is an investment today.

When the future of a company is dependent on a decision from a regulator, it poses an obvious and significant risk to investors. There's no way to perfectly forecast or predict what the end result will be. There is a temptation to roll the dice and hope that a positive decision sends the stock soaring, but the danger is that the opposite could send it into the abyss. And there may not be much room for a middle ground. Given the stock's volatility, it's not likely that there will be a mild, calm response from the markets.

With net losses in seven of its last 10 years, and sales declining from $7.6 billion in 2009 to just $1.2 billion this past year, Kodak isn't an enticing investment without this loan and a subsequent entry into drug ingredient production, which could unlock significant growth opportunities for the company.

There's a lot riding on the conclusion that lawmakers and regulators reach, and until they make a decision, investors should stay far away from the stock. It's anyone's guess where it might go in the coming weeks and months.