Eastman Kodak stock has tripled today alone after the company said it received a loan from the government to produce ingredients for drugs used to battle the coronavirus. This week, Kodak stock has climbed than 2,000%, carrying its valuation to almost $2 billion following the news about the government loan.
However, after today's initial pop, the shares have lost nearly $20 in value, bringing the company's market capitalization to $1.51 billion.
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Kodak stock soars on plan to shift production to drug ingredients
The photography company said this week it will shift production in its factories from cameras and photography-related products to drug ingredients.
President Donald Trump announced that the federal government has struck a deal with Eastman Kodak to manufacture ingredients used in generic drugs to battle COVID-19. The government awarded Kodak a $765 million loan under the Defense Production Act so it can begin producing drug ingredients. The loan is the first of its kind.
Trump said during a press conference on Tuesday that the loan marks the 33rd time the government has used the Defense Production Act. He also said that the deal with Eastman Kodak will help to bring back jobs and "make America the world's premier medical manufacturer and supplier."
Kodak said on Tuesday that it will manufacture pharmaceutical ingredients that the Food and Drug Administration has identified as essential but are in a chronic shortage nationwide. The photography company said it will expand its current factories in St. Paul, Minn. and Rochester, N.Y. and create a new Kodak Pharmaceuticals division.
Not such a strange shift
We've seen some pretty bizarre changes in companies over the years, especially as many firms changed their focus to cryptocurrencies to tap into the bitcoin craze despite their original intent having nothing to do with cryptocurrencies. However, Kodak's change is a bit different.
The fact that the transition falls under the Defense Production Act isn't the only thing that makes Kodak's change different. In a statement, Kodak Executive Chairman Jim Continenza said they firm will leverage its "deep expertise in chemicals manufacturing" in making the transition.
Additionally, CNBC reports that this isn't the first time Kodak will be manufacturing drugs. In the 1990s, the company produced nonprescription medications like aspirin. It then sold that business to SmithKline Beecham in 1994.
Eastman Kodak has been a penny stock since 2018, trading below $5 a share. Before the bump Kodak stock received on Tuesday, the company was valued at only about $115 million. After today's increase, Kodak's market value approached $2 billion before falling back to the $1.5 billion range.
In today's initial 500% increase, Kodak stock tripped multiple circuit breakers that halted trading today. Over 110 million shares of the stock have changed hands, which is over 23 times the usual volume.