This is a Kodak time for investor hysteria on Wall Street and the tremendous run-up in the stock of Eastman Kodak is just another instance of the current frothy market. Kodak’s shares (KODK) are still up around 530 percent in the past five days — even after major drops at the end of last week and a decline of more than 20 percent on Monday — following reports that the government will lend it $765 million to assist in drug manufacturing as part of a new pharmaceutical project.
Yet with that effort, Kodak does not immediately become the next Pfizer (PFE) or Merck (MRK). Although Kodak has experience supplying chemicals for the film industry, there is no assurance that the firm can easily morph into the very different pharmaceutical manufacturing sector.
Besides, Kodak (which went bankrupt in 2012 and returned a year later from Chapter 11) has a history of attempting to cash in on certain hot trends. For example, it launched KODAKCoin in response to the craze of bitcoin and crypto-currency in 2018.
And yet it seems that Kodak has become a common stock for the buying and selling of younger day traders. Kodak is the most widely traded stock on the market over the last week, as per data from Robintrack, a company that tracks holding trends of traders using common trading app Robinhood.
Elon Musk’s super-hot electric vehicle firm Tesla (TSLA), mega-cap techs Apple (AAPL), Microsoft (MSFT) and Amazon (AMZN), and biotech Moderna (MRNA), operating on a Covid-19 vaccine, are the only stocks with a greater follow on Robinhood in the past month.
The Kodak runup is suggestive of this year’s dramatic increase in bankrupt firms. Hertz (HTZ), JCPenney (JCP) and Diamond Offshore oil driller (DO) are only a few stocks that surged after Chapter 11 filings.
“The market is more driven by retail [investors] in the short term than it has been in some time,” Jason Brady, President and CEO of Thornburg Investment Management, said. But the sugar rush is not likely to last long. In the last few days, the big slide in Kodak’s shares could be a sign that short sellers — investors betting the stock will go down — lend more shares and sell them, driving the price down in the process.
In a statement, Ihor Dusaniwsky, managing director of predictive analytics at S3 Partners, said other investors may be trying to lock in big profits from the past week and are now selling shares.
The rapid rise in Kodak stock and quick pullback is just another strong example of retail investors playing for the short term, rather than investing for the long haul. Brady of Thornburg represented the success of stocks with weak fundamentals such as Kodak as an example of the stock market having “jumped the shark.”