Eastman Kodak Company (KODK), a hardware, software, consumables, and services company better known for its commercial print and imaging services, announced on 1/9/18 that it would be moving into the crypto space.
KODK’s plan involves WENN Digital in partnerships with KODAKOne and KODAKCoin. KODAKOne will help to solve image copyright infringement by utilizing blockchain technology. KODAKCoin, a cryptocurrency, will be used to pay photographers.
Kerrisdale doesn’t buy it. First, KODAKOne’s idea of storing images in a database and linking to a hash in the blockchain is simply cumbersome and inefficient. The idea that photographers would rather be paid in KODAKCoin instead of over real money doesn’t hold water either.
Investor Sahm Adrangi says it’s simply an attempt by KODK to jump on the cryptocurrency ICO (initial coin offering) hype and ride it as far as they can.
However, once investors see that earnings are not increasing when KODK releases its next earnings report, they’ll realize this is simply the last gasp of a dying company.
KODK’s announcement certainly popped the stock price. It shot up 400%, leaping from $3.05 to a high of $13.28. In a little under a month, the stock was back below $6. KODK’s stock price has been steadily sliding since 2013. Kerrisdale is convinced that nothing will stop its ultimately slide below $1.
It isn’t all negative for KODK. The day before the announcement, board members conveniently granted themselves KODK stock shares.
USA Today reported on Jan. 31 that KODK had to delay the launch of KODAKCoin by several weeks, due to the vetting of investors. The New York Times caught onto the story as well and asked what the company will do with the money it raises since there were no details forthcoming. They also asked why a similar system could not be built without the blockchain.
Kyle Samani, a partner at the cryptocurrency trading firm Multicoin Capital, put it very succinctly,
“It feels like a publicly traded company issuing a token to raise its stock price from the grave.”
He isn’t the only one in that camp. Jay Clayton, the chairman of the Securities and Exchange Commission, said in an SEC speech that “looking closely at the disclosures of public companies that shift their business models to capitalize on the perceived promise of distributed ledger technology.”
You can read the full Kerrisdale Capital report on Kodak here http://kerr.co/kodk. CNBC also picked up the report. Kerrisdale Capital has taken a short position in KODK and views the equity as worthless, implying a downside of -100%.