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John H. Ford
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For the past 30 years, I have been involved in startups, as a founder, and active investor. My first company was purchased by Johnson & Johnson, which set the foundation for future investments. My level of trading escalated after graduating from college, primarily as a result of my... More
  • Kodak could double or drop in half by June 23 3 comments
    Jun 7, 2011 5:43 PM | about stocks: KODK

    We have an interesting situation with Eastman Kodak.  They are suing Apple and RIM for patent infringement.  ITC judge Paul Luckern found in January that neither Apple nor RIM infringed on Kodak's patent.  Then, on an April 15 filing, the ITC staff  sided with Kodak on three of the five disputed phrases and said the claims terms no longer provide the basis for noninfringement.  In other words, they said Apple and RIM are infringing on Kodak's patents.

    The six member commission is scheduled to release a decision by June 23.  Even though the agency can't order monetary damages, the threat of being shut out of the US market could provide incentive for Apple and RIM to settle quickly.   If the decision is in favor of Kodak, the share price could double.  If not, it could drop in half.  According to Kodak, this is a $1 billion lawsuit. 

    There are a couple of ways to play this.  You could buy the common stock, but if they lose the lawsuit, the share price could plummet.  What I am doing is buying July $4 calls.  If they lose the lawsuit, I will lose 50% to 100% of my investment.  If they win, I should see at least a 5X to 10X return on my investment. 

    In my opinion, they have at least a 50% chance of winning this lawsuit.  If they lose and the share price drops below two dollars, that could provide a different type of opportunity.  As much as I dislike this company's business model, they do have assets that at some point warrant an investors attention.  But for now, I am holding on to the July calls and waiting to see the outcome.
    Stocks: KODK
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Comments (3)
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  • maxwel
    , contributor
    Comments (14) | Send Message
     
    why would it drop in half when they have all that cash. they should be profitable this year
    10 Jun 2011, 10:16 AM Reply Like
  • John H. Ford
    , contributor
    Comments (48) | Send Message
     
    Author’s reply » Yes, they do have cash, but they have more debt than cash, so that is not a valuable asset. I do not expect them to be profitable this year. Potentially their most valuable asset is their IP, and depending on the ruling we will find out if there is actually value there are or not. If they cannot generate revenue from their IP, I believe the stock price will fall below two dollars.
    11 Jun 2011, 09:29 AM Reply Like
  • maxwel
    , contributor
    Comments (14) | Send Message
     
    if u look at the instatutional buying it quite high. Short interest its quite high. Short squeeze is a huge win fall for longs
    12 Jun 2011, 01:34 AM Reply Like
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