Charlotte Street Partners



A Kodak moment

Written by Katie Stanton, associate partner
Edited by Iain Gibson, associate partner
3 August 2020

Good morning,

There’s nothing wrong with a healthy pivot. Like when I decided aged seven that I no longer wanted to pursue a career as a dolphin, but as a television newsreader, subsequently conjuring for myself an alter ego, Letitia Green, who worked the prime-time slot reading out three-day old newspaper articles to vacant rooms or, worse, to the family desktop (we still have the evidence). Or when, post-uni, I applied to basically all jobs, regardless of industry or position, totally willing to pivot and adapt to whoever the willing employer.
There are merits to flexibility. But there are also drawbacks, the primary one being a lack of focus and direction.
So when Kodak announced last week its shiny new foray into drug making, I was a little confused. I know it as a retro camera maker. Then again, perhaps my tendency to classify it as ‘retro’ justifies the change in tack. The traditional business has become essentially irrelevant, what with everyone now having camera phones powerful enough to make even the dog’s dinner look like a deconstructed five-star something.
Still, last Tuesday, more than eight years after bankruptcy, Kodak’s share price shot up more than 1,000% after the company announced it had secured a $765m (£592m) loan from the American government, the idea being that it will supply components for generic drugs to fight coronavirus as part of a new Kodak Pharmaceuticals operation.
Apparently, it will take three to four years to reach large scale production – much slower than necessary to be of any use in the current pandemic. Of course, this fact is of no consequence to Donald Trump, who is more focused on the company’s existing capacity to produce photographic chemicals which, you know, are obviously the same as ingestible drugs, right?
Overlooking a potential expertise deficit, the US president called Kodak “a great American company – you remember this company”.
You see, Kodak’s pivot chimes with a wider shift in tone in America around independence and self-sufficiency. The coronavirus has exposed a reliance on foreign, and specifically Chinese and Indian, pharmaceuticals that policymakers are not entirely comfortable with.
This is where it gets a bit icky.
While Kodak is not the only photography firm to take the innovative leap into pharma during the pandemic (Japan’s Fujifilm is working on a potential Covid-19 vaccine), there are a few curiosities worth exploring.
Crucially, the day before the loan was announced, trading in shares surged, with roughly seven times the average daily volume of Kodak shares traded. As a result, its stock jumped 25%. This activity raised suspicion about improper trading and information sharing ahead of the market-moving news but, apparently, investors were tipped off about the announcement via informal news sources and social media in Rochester, where Kodak is headquartered.
Coincidentally, Kodak’s chief executive, Jim Continenza, was handed 1.75m stock options on that same day, which ended up netting him more than $30m. Board members also came into 240,000 additional stock options in May, which are now worth about $4m. A spokeswoman for Kodak declined to answer questions about why the directors were granted these options.
Finally, and very speculatively, members of Congress themselves do not have the best track record in terms of trading individual stocks on non-public information. Indeed, earlier this year it was alleged that senators Richard Burr and Kelly Loeffler sold equities after receiving briefings on the dangers of the novel coronavirus.
Now, that’s not to say that anything untoward is happening here, or indeed that anything happened back in March. But these are certainly coincidences worthy of raising an eyebrow or two. Whatever the case, I’m sure shareholders old and new are enjoying their 2020 Kodak moment.


New “life-saving” 90-minute tests which can detect coronavirus and flu will be rolled out in care homes and laboratories from next week. The “on-the-spot” swab and DNA tests, supplied by DnaNudge and Oxford Nanopore, will help distinguish between Covid-19 and other seasonal illnesses, the government said.
A Conservative MP has been released on bail after being arrested on suspicion of rape. The Sunday Times reported the allegations against the former minister, which were said to have taken place on four separate occasions between July 2019 and January 2020, had been made by an ex-parliamentary employee. The alleged victim has said that she was “devastated” that he was not suspended from the party. (£)
The number of Covid-19 related deaths is nearly triple what Iran’s government claims, according to a data leak uncovered by a BBC Persian service investigation. The government’s own records appear to show almost 42,000 people died with Covid-19 symptoms up to 20 July, versus the 14,405 reported by its health ministry.

Business and economy

Microsoft has said it will press ahead with talks to buy video app TikTok’s US operations from its Chinese owner ByteDance, despite the reservations of Donald Trump. The US technology group also revealed that the potential transaction would include TikTok’s business in Canada and its Australia and New Zealand operations, amid growing scrutiny of the app globally. (£)
HSBC’s profits for the first half of this year have plunged 65% as it battles the coronavirus downturn. The UK’s biggest bank posted pre-tax profits of $4.3bn, compared to $12.4bn for the same period last year, a larger fall than analysts had forecast.
The gap between how much people earn in London and the rest of the country has narrowed since the early 2000s, according to the Institute of Fiscal Studies (IFS). While geographic inequalities in earnings and household incomes have dropped, trends in the housing market have led to a jump in wealth inequalities across the UK.

Columns of note

Writing in The Financial Times, Laura Pitel uncovers the threat of Turkey’s currency crisis. With tourism struggling and investors fleeing the country, president Recep Tayyip Erdogan is contrastingly optimistic about “strengthening the immune system” of the Turkish economy and has burnt through tens of billions of dollars of reserves in the hopes of a quick recovery. This is a huge gamble, but will it pay off? (£)
In City AM, Julian Richer argues that ethical capitalism can rebuild the world for the better. Not only this, but it is necessary for maintaining consumer trust in business in the wake of the Covid-19 pandemic.

Cartoon source : The Times


The week ahead

Coronavirus will continue to be front of mind during a busy week for corporate earnings reports, with Uber, HSBC, Diageo and BP among the big names to watch.
The Bank of England sets policy on Thursday, with no shifts expected following the £100bn of quantitative easing announced in June, which is expected to last at least until the end of this year. Meanwhile Australia’s central bank will meet amid growing concerns of a second wave of Covid-19 and the first bout of deflation in 22 years. 
UK trade secretary, Liz Truss, begins her week in Washington, where she will meet top trade officials and express her anger over “punitive” tariffs levied on British goods in her first face-to-face meeting since negotiations for a trade agreement began.
And finally, Poland’s supreme court is sitting today with the aim of ruling on the validity of the July presidential election. Incumbent Andrzej Duda, an ally of the ruling nationalist Law and Justice party, beat Warsaw mayor Rafal Trzaskowski by 50% to 49%. The main opposition party, the centre-right Civic Coalition, backed by Trzaskowski, has lodged an official complaint, claiming that the election did “not meet democratic standards”.

What’s happening today?

Argentex Group
Henderson Alt
Ince Group
Tekmar Group P.


UK economic announcements
(14:45) PMI Manufacturing

Int. economic announcements
(08:55) PMI Manufacturing (GER)
(09:00) PMI Manufacturing (EU)
(14:45) PMI Manufacturing (US)
(15:00) ISM Prices Paid (US)
(15:00) Construction Spending (US)
(15:00) ISM Manufacturing (US)
(20:30) Auto Sales (US)

Source: Financial Times

did you know

The average person walks past 11 murderers in their life.

Parliamentary highlights

House of Commons

In recess until 1 September

House of Lords 

In recess until 2 September 2020.

Scottish Parliament 

In recess until 10 August (with the exception of 30 July and 6 August 2020, on which dates business may be programmed by the bureau)

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