Being an investor who is somewhat interested in companies emerging from bankruptcy, I began watching Eastman Kodak Co. (KODK) around the beginning of November when the stock left the OTC for the NYSE after having emerged from bankruptcy on September 3rd. In trading slightly over $19.00 since its emergence, its stock has nearly doubled in less than three months, closing at $36.88 on Friday. Clearly, investors see a new, lean and mean machine that not only holds promise in breakthrough solutions for functional printing markets, but will also be able to service the $679 million debt it emerged with.
This obvious excitement that unfortunately wasn't a part of my portfolio led me to contact the company about three weeks ago to attempt to find out what all the hoopla was about. To be honest, it was a little frustrating, as I ended up having to schedule a call-in appointment for about two weeks down the road after having been contacted by Kodak in returning my call, suggesting they were swamped with inquiries about the business. Nevertheless, I was just happy I was making progress and thus, I finally spoke to Kodak's David Bullwinkle this past Friday, January 10th and was given a 30-minute window in which to probe for answers.
I immediately inquired about the hype surrounding Kodak's Eastman Business Park and subsequently learned there are about 100 companies in operation, some of which are established businesses and some that are startups. These companies seemingly have different arrangements with Kodak, some whereby Kodak acts as a supplier to and others in which Kodak has a partnership with. It was at this point I inquired about one of those companies in which I understood Kodak had a partnership with and that was Uni-Pixel, Inc. (UNXL), a publicly traded company on the Nasdaq that I was certainly aware of due to the constant back and forth loud bickering between the bulls and bears and a stock with a float whereby the short interest is over 60% and always labeled as one of the most hated stocks on Nasdaq.
What I found out next really changed my entire perception of Uni-Pixel and changed the direction of the conversation altogether, as all I ever seem to hear is how big of a scam Uni-Pixel is. After a while, the constant hammering and beatdown by short-sellers takes a toll on shareholders and many have thrown in the towel, especially with the company's perpetual silence and seemingly lack of transparency, but I immediately went long the stock after hanging up the phone with Kodak, as I had no earthly idea just how bullish Kodak is on Uni-Pixel.
In trying to find out what financial benefits that Uni-Pixel could offer Kodak as a result of their partnership, I first asked David if he was aware of the recent resignation of Uni-Pixel's CEO and COO and obviously he was, stating to a perceived degree that the communication between Uni-Pixel and Kodak is always cohesive, never skipping a beat. I then asked if a new CEO might come from within Kodak and I was simply told that the best new fit would most likely be an operational person and not a salesperson. I could easily tell that Kodak is in favor of someone that doesn't overpromise and underdeliver.
With all the above stated, this obviously led me to next inquire about Uni-Pixel's alleged breakthrough touch screen technology and if it's the real deal or pie in the sky as short-sellers have tried to pound into the mind of investors. I pointed out to David that many short-sellers are claiming that Kodak was hoodwinked by Uni-Pixel and David confidently stated that Kodak executed months of due diligence on Uni-Pixel and their technology before ever entering into a partnership with them.
It was at this point in the conversation that David said Kodak is in constant communication with Uni-Pixel's customers and when asked about analysts prior estimates of production and output for Uni-Pixel, Kodak believes today that these prior estimates can be "greatly exceeded," as the market opportunities are enormous and growing, pointing out low cost opportunities and benefits for companies choosing Uni-Pixel.
I then asked about Kodak's relationship with Kingsbury and was told there was no partnership and that Kodak mainly acted as a supplier to Kingsbury. I asked whether Kingsbury or Uni-Pixel offered more of an opportunity to Kodak and was told the revenue opportunities from Uni-Pixel far exceed that of Kingsbury.
Obviously the market is saying Kodak will ultimately be successful in its emergence from bankruptcy and although I'm in the very beginning stages of conducting my due diligence, I was pointed in the direction of the July 15th lender presentation as the most beneficial place to start in the gathering of information. As far as their partnership with Uni-Pixel, there's no doubt in my mind that Kodak believes Uni-Pixel will be a very significant factor to their success going forward.
With regard to Uni-Pixel, several things stand out. Kodak not only agrees with Uni-Pixel's January 6th press release about timelines that will finally be met, but it's their belief that prior production estimates can possibly be "greatly exceeded" and thus, if prior EPS estimates on average were $3.64 for 2014 (obviously delayed for at least 6 months), I would suspect that EPS of $5.00 in 2015 isn't out of the question.
As far as the SEC inquiry surrounding agreements with customers, this would be the least of my concerns, as any possible fine won't be significant in relation to the company's very large cash position of over $46 million (no debt) that is more than enough to see them through production.
Lastly, if you liked the stock at over $40 a share in the middle of April last year when production was allegedly just a few months away, you've got to love it here at Friday's closing price of $9.34, as the company is much further along in its quest to finally reach the market and the current sentiment from Kodak is extremely bullish.