The KodakOne blockchain and KodakCoin initial coin offering (ICO) business idea of Eastman Kodak are “flat-out silly” and a “nonsensical business concept” from a team with “zero credibility”, said a report of Kerrisdale Capital – a hedge fund that holds a short position on Kodak’s stock, and is known for giving strong opinions on public stocks that could move prices.
In harsh words, the Kerrisdale Capital analysts describe the Kodak plans, which led to the Kodak stock price rising 44% to $5.50, to eventually settle down to $4.30, up 37.6% on the day of the announcement, as a “last-ditch stock promotion gambit for a company hurtling towards bankruptcy.”
Further in the report, Kerrisdale Capital notes that even though blockchain and cryptocurrencies are very exciting and can disrupt a lot of industries, their application in media rights licensing as KodakOne and KodakCoin is not among them. “The use of blockchain in operating an image copyright platform accomplishes nothing”, the report said, adding that no photographer would rather be paid in KodakCoins over real money. “KodakOne is little more than a moribund company’s hollow attempt to chase the ICO craze. It’s a PR stunt – a distraction that will pass when the company reports earnings and reminds investors of its distressed financial position”, Kerrisdale Capital noted.
According to the analysis, Kodak faces a number of significant debt maturities, tightening liquidity, and restrictive debt covenants while financials are in free fall. Additionally, Kodak is not competitive enough and the management fails. “The situation is grim and these same set of circumstances bankrupted the company 6 years ago”, Kerrisdale Capital said, predicting “an eventual wipe-out”. “We view the equity as worthless, implying downside of -100%”, the report concluded.
We remind you that in early January Kodak, which has already been bankrupt once, announced it ventures into the blockchain territory. It said it will launch the photographic image rights management blockchain platform KodakOne, in partnership with WENN Digital, and an ICO of KodakCoin to be used as a payment token on the platform. The idea was for photographers – both amateur and professional – to license their photos on the ledger and get payments in KodakCoins for their work.
The public ICO was set to launch on January 31, 2018, but was later delayed. The postponement was explained with an extended process of verifying that the investors were accredited in the US, meaning they have a net worth of more than $1 million or an income of at least $200,000. In the pre-sale were sold 8 million KodakCoins. The process of verification was supposed to take “several weeks”. The delay led to a 15% drop in the Kodak stock on the day. There were also rumors that Kodak was simply trying to take advantage of the blockchain and cryptocurrency buzz.