Kodak surges as review says CEO’s option deals broke no laws

Shares of Eastman Kodak Co KODK.N surged more than 40% on Wednesday after an independent review cleared its chief executive of insider trading in relation to a $765 million U.S. government loan to produce pharmaceutical ingredients.

The review by Washington-based law firm Akin Gump, published on Tuesday, found securities transactions made by Chief Executive Jim Continenza around the time of the loan did not violate internal policies, but found certain “gaps” in Kodak’s insider trading processes.

If premarket gains hold, it will mark Kodak’s best day since late-July, when news of the deal catapulted the stock to $30 a share from $2 in just three sessions, partly due to retail investors on the Robinhood trading app piling into the shares.

Kodak, once an industry leader in cameras and the imaging business but long in decline as a global name, has since lost about 80% of its market capitalization as the transaction came under scrutiny from the federal government.

The White House said last month the loan would not proceed unless the company is cleared of the alleged wrongdoing.

“Whether the U.S. government accepts this analysis and restores its business relationship with the company remains an open question,” said Rick Meckler, partner, Cherry Lane Investments, a family investment office in New Vernon, New Jersey

“For now, investors seem to feel it is worth speculating on given how high the stock rose on the initial news of the loan.”

Short interest in the company – reflecting bets that its stock would decline after hitting the highs in July – had jumped to about 22% as of Aug. 31, according to Refinitiv data, from nearly 4% on July 16.