August 22, 2013
In my past career as a journalist I would constantly have to remind myself that just because I sat in a newsroom digesting the daily deluge of news, others were not. It was unfair to expect everyone to have the same knowledge of the day's happenings simply because I'd sat through three newscasts. That feeling returned to me this week due to several conversations I've had with folks regarding Kodak's emergence from bankruptcy.
I'm fairly certain that most now know that Kodak declared bankruptcy and will soon emerge from the proceedings, a new, albeit very different company. When Kodak does officially exit bankruptcy in early September, existing shares of Kodak stock will be cancelled and become void of any monetary value. New shares will be issued to firms that have put up financing to support the new company. We expect shares to begin trading shortly after Labor Day. While many of us have discussed this with clients and acquaintances, to expect that everyone else knows is both unfair and unreasonable. In keeping with that thought, some bullet points regarding current Kodak shares, and what to expect upon the new Kodak's emergence.
- Kodak shares will cease trading and lose all value upon Kodak's emergence from bankruptcy. At this point
- Existing shareholders can sell current shares at any point until they are cancelled. Over the past month, shares have traded from a low of $0.04 to a high of $0.13.
- Existing Kodak shares will continue to trade until the company official steps out of bankruptcy. Even Wednesday, with knowledge that shares will eventually become worthless, nearly 100,000,000 shares exchanged hands.
- Existing shareholders are not entitled to receive shares of the new company in exchange for the current shares. New shares will be issued to firms that have provided Kodak with the needed financing to exit bankruptcy.
- Current shareholders who do not sell their shares before the company exits bankruptcy will want to be aware of the worthless securities law - shares must be treated as if they were sold on the final day of the tax year. Be sure to consult your tax professional for greater clarity on how to claim a loss due to a worthless security.
I am not recommending purchasing shares to speculate or to try and make a quick profit - just sharing some thoughts that have come up in conversation recently. If you have questions, don't hesitate to ask.
(This article contains the current opinions of the author but not necessarily those of Brighton Securities Corp. The author's opinions are subject to change without notice. This blog post is for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. References to specific securities and their issuers are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities).