Kodak sets $1 billion stock buyback, stock jumps
Written on June 25, 2008
Eastman Kodak Co (EK.N: Quote, Profile, Research, Stock Buzz) said on Tuesday it would buy back up to $1 billion of its stock, driving the photography company’s share price up nearly 17 percent from historical lows.
Kodak said it would fund part of the stock repurchase program, which is authorized through the end of 2009, from a $581 million tax refund also announced on Tuesday. The remainder is expected to come from available cash on hand.
The move sparked active buying of Kodak call options as traders bet on more share price gains. Until Tuesday’s rally, Kodak shares had tumbled 28 percent since it posted a wider-than-expected quarterly loss on May 1.
At those recent lows, the $1 billion plan would represent about 25 percent of Kodak’s outstanding shares.
Kodak has completed major elements of an expensive transformation into a smaller company that focuses on digital photography products and services, but has yet to post sustained profits and in the first quarter piled up wider losses in its consumer printing and digital camera units.
“Eastman Kodak is seeing a lot of call buying on this buyback news. Most traders are focusing on the July $15 calls which offer a cheap way to play the stock for a move higher,” said Frederic Ruffy, options strategist at Web information site WhatsTrading.com.
REFUND TO BOOST EARNINGS
Kodak said the tax refund related to an audit of certain claims filed for tax years 1993-1998 and is comprised of a refund of past federal income taxes paid of $306 million and interest earned on the refund of $275 million.
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