Penny Stocks On The Move: Eastman Kodak (EK) Part 2

| October 5, 2011 | 0 Comments

What a wild week for Eastman Kodak (EK)…

I wrote about Kodak just over a month ago.  But this week’s rollercoaster ride makes last month’s move look like a kiddie ride.  It’s hard to imagine any penny stock experiencing more volatility than Kodak saw this past week.

Remember, EK use to be quite the high flyer, including illustrious membership in the Dow Jones Industrial Average.  But over time, lack of innovation destroyed the company as digital cameras became the norm.

Back in August, EK shares briefly dropped below $2.00 a share. It was the first time they had breached the level since, well, the 1960s.

But my August article wasn’t so much about the fall of Kodak but rather the opportunity.  The company has many patents to their name and had announced their intentions to sell them off.

Investors liked the idea… and the shares jumped.  On August 31st, the price reached a high of $3.44.

But that was then…

It’s possible $3.44 is the highest EK will ever be again.  You see, since then things have gotten much, much worse.

Not only has the broad market been hammered by negative macro news, but now Kodak is firmly in the bears’ crosshairs.  And the shares are plummeting to new lows.

Why the focus on EK?

Simply put, rumors of bankruptcy are making their way across trading desks and through chat rooms.  And once those sorts of rumors take hold, they’re extremely hard to dispel.

The fact Kodak is struggling is no surprise – but this is the first we’ve heard of bankruptcy.  Actually, the rumor is they’re looking to restructure… but that’s just a fancy word for going bankrupt.

This past week, EK has truly taken it on the chin.  In fact, when the restructuring rumors first hit the wires, the shares plunged to as low as $0.54.  Talk about falling off a cliff!

To Kodak’s credit, management quickly did their best to quash the bankruptcy rumors.

As a matter of fact, they’re denying any intention of filing bankruptcy.  What’s more, they made a $14 million bond payment this past Monday… not the sort of thing a company going bankrupt typically does.

These reassurances seemed to have worked.  Investors flocked back into EK shares, driving it up as high as $1.63… the day after the shares had traded for $0.54.  In case you’re wondering, that’s a 202% one-day climb.

But honestly, it doesn’t make me feel any better about the company…

The shares are still down 75% from the 52-week highs.  And the company is hardly out of the woods.  While Kodak may not be on the verge of bankruptcy, they’re clearly in trouble.  I don’t see the company providing any real shareholder value for the foreseeable future.  For now, I’d stay away.

Yours in profit,

Gordon Lewis

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Category: Penny Stocks On The Move

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