Thomson Reuters
- Kodak said it would issue 30 million shares to holders of its convertible bonds, according to an 8-K filed with the SEC on Monday.
- The move is a signal that its debtholders are ready to cash in on last week's 940% stock rally, which was spurred by the company receiving a $765 million from the US government to produce generic drug ingredients.
- Kodak's outstanding shares will increase 60% to 75.5 million after the debt is converted into equity, which is expected to happen Monday.
- Kodak shares slumped as much as 22% on Monday after the Rochester, New York-based company disclosed the news.
- Visit Business Insider's homepage for more stories.
Kodak's bond holders are ready to cash in on last week's monster stock rally that saw shares jump as much as 2,190% in three days after the company was awarded a $765 million loan from the US government.
In an 8-K filed with the Securities and Exchange Commission on Monday, Kodak said it would issue 29.9 million new shares after it received notice from its convertible debt holders that they were ready to exercise their right to convert their debt into stock.
Convertible debt is a hybrid bond that allows the debtholder to convert their notes into stock. The convertible notes are typically reserved for companies with junk debt ratings, and are typically held by bond investors who see both upside potential and high risk in the company.
Kodak said on July 29 it received conversion notices from holders of its 5.0% secured convertible notes due 2021. The aggregate value of the convertible notes is $95 million, which will then be converted into 29.9 million shares that can then be sold.
At today's opening price of $21.00, the $95 million convertible notes stake is worth $628 million.
According to the 8-K, the notes were issued in 2019 to a number of funds managed by Southeastern Asset Management.
Kodak's outstanding shares will increase 60% to 75.5 million after the debt is converted into equity, which is expected to happen Monday.
Kodak shares slumped as much as 24% to $16.29 in Monday trades.
NOW WATCH: Why electric planes haven't taken off yet
See Also:
- A market-research expert breaks down the 3 sectors and 4 stocks that he says are best to own as a new Cold War between the US and China heats up
- 3 Wall Street pros managing $12 billion in assets share their strategies for profiting from the economy's recovery — and explain why investors should be aggressively taking risks now
- 'Castles built on sand': Famed economist David Rosenberg says investors are being too reckless as stocks rally — and that a vicious long-term bear market is far from over
