A private investment manager, Kerrisdale Capital, issued a negative report on its short position of Eastman Kodak Company. The firm, headed by Sahm Adrangi, had harsh comments on Eastman Kodak Company.
Eastman Kodak’s stock, under the (NYSE: KODK) ticker, doubled following the announcement of a cryptocurrency licensing and blockchain partnership.
The report cites how Kodak’s sudden stock rise was tied to a blockchain project, creating $300 million in value. The report claims that Kodak share members granted themselves shares in the company the day before they announced the licensing of the brand to a blockchain project.
German copyright trolls were also added to the Kodak team along with a stock promoter that has a questionable past.
KODAKOne plans to use the blockchain in media rights licensing. Blockchain will also be used as an image copyright platform, which Kerrisdale Capital claims will accomplish nothing. KODAKOne plans to use blockchain to initiate smart contracts to help resolve the issue surrounding copyright infringement.
Kerrisdale claims that blockchain does nothing to lower the risk or resources needed to prevent copyright infringement. The investment management company claims the idea is meant to help KODAKOne cash in on the ICO craze and is a mere PR stunt by the company.
Kodak also wants to pay photographers using KODAKCoins, which is the company’s own cryptocurrency and will be used alongside KODAKOne.
Kerrisdale Capital asserts that the move is an attempt to distract investors from the company’s distressed financial position. Kodak was being called “overvalued” in January after the stock gained 245% on the cryptocurrency announcement.
Kerrisdale Capital went as far as calling Kodak’s business concept nonsensical and criticized their KODAKCoin team claiming the team has zero credibility. The attempt by Kodak is being viewed as a last-ditch stock promotion, with the person behind the ICO being a stock promoter that has been banned from the Canadian stock exchange.
Kodak’s financial position is the biggest worry, as the company’s liquidity continues to tighten and their debt rises. Management has failed investors with negative free cash flow going unresolved and asset sales being botched.
The company filed for Chapter 11 in January 2012 and still has not corrected many of the underlying issues that led to the filing. Management has failed to correct these issues, and Kerrisdale claims that the ICO is an attempt to stop the company from falling back into bankruptcy.
The 138-year-old company is also facing the possibility of defaulting and will need to consider debt restructuring in the next 12 – 18-month period. An ICO has very little potential to change the course of Kodak, which has a high probability of falling into bankruptcy.
The report also claims that unless a photographer earns $200,000 annually or has a $1 million net worth, they cannot be part of the ICO. Tokens will also be difficult to transfer, with the tokens not able to be sold or transferred for a year after the opening.
Kerrisdale stands by their statement that Kodak is a dying company and that blockchain will not be able to save the company.