Buyback Announcement Sparks Options Interest in Eastman Kodak

Eastman Kodak (EK) jumped 13% on its buyback plan and investors buy up the Call options in hopes of more upward movement.

$1 Billion in Shares

The company announced yesterday a plan to buyback $1 billion in EK shares with the help of a $541 million tax refund dated all the way back to 1993. With a $4.04 Billion market cap and a 4% dividend, Eastman Kodak looks like a company that will be a solid investment for a longer term holding period.

Poor Performance

The company itself has performed poorly over the last two quarters missing both and missing the March quarter badly. The stock has declined over 50% in the past 52 weeks and has a high Short Ratio of 8.8. Without the buyback announced Tuesday, the stock would be something you would stay away from. But now you have to consider the dividend completely safe and the stock price at a bottom.

Calls Very Active

A large amount of Call volume yesterday in two different months shows investors looking for more price appreciation due to the news of the buyback. The July 15 Strike price had an unusual amount of volume ending the day with 15,622 options traded. Similarly, the October 15 Strike Calls saw high volume of 5,573 contracts yesterday.

Disclosure: None

Comments

[Ames Tiedeman]

How many restructurings and buybacks has this company announced in the past 20 years? Why can this company never seem to get its act together?