Investors dumped Eastman Kodak’s stock Friday amid fears that the photography pioneer is headed toward bankruptcy.
After its stock lost more than half its value in a volatile day of trading, Kodak tried to paint a rosier picture. “Kodak is committed to meeting all of its obligations and has no intention of filing for bankruptcy,” the company said in a statement. The reassurance lifted Kodak shares in extended trading, but the rebound wasn’t enough to undo the damage sustained in a brutal week for a hallowed name in U.S. business.
The Wall Street Journal rattled Kodak’s already jittery shareholders with a Friday report that the company has hired Jones Day, a law firm that dispenses advice on bankruptcies and other restructuring alternatives.
Kodak confirmed the Jones Day hiring in its statement, describing the firm as one of several advisers helping its management turn around the Rochester, N.Y., company after losing nearly $1.8 billion since 2007. “It is not unusual for a company in transformation to explore all options and to engage a variety of outside advisers,” Kodak said.
Friday’s news followed a Kodak disclosure earlier this week that the company was borrowing $160 million from a $400 million line of credit.
The daisy chain of events convinced some investors that Kodak is running out of cash as it scrambles to adapt to the age of digital imagery.
Eastman Kodak Co. shares plunged 91 cents, or 54 percent, to close at 78 cents per share. The stock regained 35 cents in extended trading after management defused the bankruptcy speculation. The shares stood at $2.38 at the beginning of the week.
The selling was so intense during Friday’s regular session that the shares temporarily stopped trading under the New York Stock Exchange’s automated controls. At one point, Kodak’s stock sagged to a new low of just 54 cents.
After 131 years in business, Kodak finds itself on shaky ground largely because of the shift to digital cameras. That change, coupled with tougher foreign competition, has undercut sales of the film that made Kodak famous.
To survive, the company has been mining its patent portfolio for additional cash. Since 2008, Kodak has pocketed nearly $2 billion in royalties and licensing fees. In July, Kodak hired investment bankers Lazard Ltd. to sell about 1,100 digital-imaging patents.
The question now is whether those measures will be enough to keep Kodak afloat. The company had $957 million in cash as of June 30, down from $1.6 billion at the start of the year.
By Andrew P. Napolitano
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