Earlier this week, Eastman Kodak Company issued chief executive 1.75 million stock options.
This is the kind of compensation decision that generally does not attract much attention, except for one thing: The day after the stock options were granted, the White House announced that the company would receive a $ 765 million federal loan to produce ingredients to make pharmaceuticals in the United States.
The news of the deal was caused by Kodak’s share of more than 1,000 percent. Within 48 hours of the options being awarded, their value was balloon, at least on paper, at nearly $ 50 million.
Government loans are part of a broader federal effort to increase the country’s ability to respond to coronavirus and pandemic future.
The choices granted to Kodak executive chairman and chief executive Jim Continenza, are the latest example of executives and board members in companies receiving such federal support to benefit from extremely efficient timing. A number of companies are involved in hunting for vaccines and treatments for Covid-19.
Vaxart insiders, for example, received stock options shortly before the California biotech company announced in June that the potential coronavirus vaccine was being tested in a program organized by a federal agency, causing of its shares immediately doubled.
A Kodak spokesman declined to comment at the time of the stock-options and stressed that the value of the options could be changed before Mr. Continenza could use them to purchase Kodak shares.
Kodak, best known for its iconic camera and film adaptation, has been struggling for years to recreate itself. The company emerged from loss protection in 2013, and its shares in recent years typically traded at $ 2 or $ 3, giving it a market value of nearly $ 100 million.
Since May, Kodak has begun talking to the Trump administration about making ingredients for pharmaceuticals, Mr. Continenza said in a television interview this week.
The deal was announced on Tuesday. President Trump says federal loans from the US International Development Finance Corporation will help reduce U.S. dependence on other countries, particularly China and India, for most of the ingredients used to make generic medicine. Mr. Trump called the Kodak deal “a breakthrough in the return to pharmaceutical industry in the United States.”
Kodak said it is creating a new pharmaceutical division and expanding its facilities in Rochester, NY, and St. Louis. Paul, Minn. The division will eventually be able to produce as much as 25 percent of the active ingredients used in generic drugs in the United States. Kodak has been in the chemical business for over a century and “there are facilities sitting there that are ready to go,” Mr. Continenza said in a TV interview this week.
It is unclear if the components produced by Kodak will play any role in the fight against coronavirus. Kodak will liaise with the federal government and other manufacturers to find out which ingredients to make, prioritizing those considered critical to American and national security.
The day before the loan was announced, Kodak’s share trading grew, and its stock jumped nearly 25 percent, closing at $ 2.62 a share. That activity raised suspicions about illegal trade leading to news moving in the market, but The Wall Street Journal reported that it appeared to be the result of media reports in Rochester, where Kodak is based, about the pending announcement.
Around the time Kodak began talking to the federal government this spring, Kodak insiders began to accept stock options. The pattern was first reported by Non-GAAP Thoughts, a digital newsletter.
On May 20, Kodak will provide 240,000 stock options to board members – in addition to the standard equity distribution in January.
May stock options awarded to directors are now worth nearly $ 4 million. Those choices deserve to be made gradually over this year.
Arielle Patrick, a Kodak spokesperson, declined to answer questions about why the directors were given stock options in May.
On the same day that Kodak was alerting the local media to the alleged deal with the Trump administration, the company’s board of directors of the company board voted to award Mr. Continenza 1.75 million stock options. allows him to buy shares at prices ranging from $ 3.03 to $ 12.
As of Wednesday morning, Kodak shares were up $ 60 each. Since they retreated to nearly $ 24, that means stock options give Mr. Continenza the right to buy shares at a deep discount.
Mr. Continenza may exercise but not all options are immediate.
Ms. Patrick said the rapid increase in the value of Mr. Continenza’s new stock options “is just paper. Mr. Continenza has not received any earnings or has no intention of selling.”
He added that the Kodak board had awarded the options to Mr. Continenza because when the company last year issued a type of debt that changed equity, the stock value and the chief executive’s choice melted down.
He said Kodak received shareholder approval in May to issue additional shares, and the compensation committee approved the options “at this committee’s first meeting since the annual meeting of stockholders,” on Monday, July 27th.
He declined to comment on why Kodak did not wait until after the White House announcement to provide options.
The increase in Kodak shares this week also changed some of the stock options Mr. Continenza received when he became chief executive. They have effectively become worthless due to Kodak’s low prices. This week, their value rose to nearly $ 59 million, Reuters reported.