Kodak Shares, Options Surge Amid Buyout Speculation
Eastman Kodak Co. shares rose 11 percent to a five-month high, spurring bullish options trading, amid renewed speculation the company is an acquisition target.
“There’s nothing that I’ve seen that would substantiate the buyout rumors, but that might be the best reason for today’s upsurge,” said Christopher Carosa, president of Carosa, Stanton & DePaolo Asset Management LLC in Mendon, New York, and manager of the Bullfinch Greater Western New York Series mutual fund, which holds 1,600 shares of Kodak.
Eastman Kodak doesn’t comment on its share price, said David Lanzillo, a company spokesman.
The 130-year-old photography company reshaping itself for the digital age jumped 11 percent to $5.31 as of 4 p.m. in New York, extending this year’s gain to 26 percent. The shares closed above their 200-day moving average for the first time since June 18.
The move past the 200-day threshold prompted short sellers to buy stock and call options to protect against losses, said Larry Peruzzi, senior equity trader at Cabrera Capital Markets Inc. in Boston. Trading of calls to buy the stock rose to almost 46,000 contracts, 25 times the four-week average and 11 times the number of puts to sell.
An acquisition “is something that’s been talked about incessantly,” said Carosa. “At least several months ago there was talk that the best exit strategy would be just to sell the company.”
Kodak “would be a nice acquisition for a number of firms,” said Sean Egan, president of Egan-Jones Rating Co. in Haverford, Pennsylvania, which rates Kodak’s debt. “Furthermore, it appears as though a buyout is financially feasible.”
Volume for Kodak shares jumped to 38 million shares, the most since January and almost seven times the four-week average.
Kodak is the 11th-most shorted company in the S&P 500, creating an incentive to buy the shares as they rise. Short sellers sell borrowed securities expecting prices to fall, and incur losses when prices rise. Short covering occurs when an investor buys a security to close a short position.
Short selling in Rochester, New York-based Eastman Kodak is 16 percent of outstanding shares as of Dec. 7, compared with a 3.1 percent short interest in the Standard & Poor’s 500 Index, according to data compiled by Bloomberg and Data Explorers, a New York-based research firm.
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