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Jan 10, 2018

S3 Analytics: Kodak Joins Long Island Ice Tea in the Crypto/Blockchain Sector

Customers will have to change their brands if they want to sip an iced tea while processing their digital prints as Eastman Kodak Co. (KODK) has joined Long Blockchain Corp. (LBCC) in the cryptocurrency and blockchain arena.

Last month Long Island Ice Tea Corp (LTEA) stated that it was entering the blockchain technology and cryptocurrency businesses by focusing on blockchain related “partnerships, investments and acquisitions” and bitcoin mining. The diversification would be dependent on a 1.6 million share offering. LTEA’s stock price closed up 183% on the announcement and is still up 124% three weeks later. LTEA/LBCC was a nano-cap stock that received a deficiency notice from the Nasdaq but short interest was only $1.2 million prior to their announcement and is only $3.4 million now, primarily due to the miniscule amount of lendable shares in the name.

Day trading in LBCC will be limited to traders buying shares or selling their existing holdings as short sellers will not be able to get locates in size to trade the downside of LBCC’s run-up. Any scraps that short sellers can find at their brokers will be expensive – small borrows, most under 5,000 shares each, were going at over 100% fee levels.

On Tuesday, Eastman Kodak announced that they will be jumping into the deep end of the cryptocurrency and blockchain pool by creating a blockchain digital ledger for photographers and filmmakers to protect and organize their photo and film copyrights. Not to be outdone by Overstock.com’s CEO Patrick Byrne, the firm is also planning an ICO, creating its own cryptocurrency KODAKCoin and beginning a Bitcoin mining operation.

Kodak’s stock price increased 119% on Tuesday and is up 245% in just two days as traders bid up the stock following their announcement. Kodak short interest was minimal prior to their announcement, $10.4 million at the end of 2107, but is increasing as traders are starting to short shares into this short-term hyper-rally. Short interest more than doubled to $25 million yesterday and will top $70 million by end of trading Wednesday. Stock borrow supply, although larger than LTEA’s, is still relatively limited with only around 10 million shares left to short, unless more long lendable inventory hits the market.

Kodak stock borrows have gotten much more expensive due to the volatility in the name with rates on new  short sales also topping the 100% fee level. We are even starting to see some recalls hitting the street now as some longs who were lending out their shares have sold into the rally to realize some of their short term profits.

If Kodak’s stock price continues to rally, we can be certain that short sellers will use up virtually all of the lendable long inventory over the next few days. But even if shorts take down all the available long inventory, it will not put a dent in Kodak’s stock price as the 10 to 20 million shares of additional stock sold short is inconsequential compared to the 179 million shares of trading volume over the last two days. If and when Kodak’s stock price tumbles, it will be the long shareholders selling their shares and pulling the rug out from under Kodak’s rally, not the shorts taking the wind out of Kodak’s sails.

Want deeper insight into the above analysis? Contact:
Managing Director Predictive Analytics, S3 Partners, LLC
The information herein (some of which has been obtained from third party sources without verification) is believed by S3 Partners, LLC ('S3 Partners') to be reliable and accurate. Neither S3 Partners nor any of its affiliates makes any representation as to the accuracy or completeness of the information herein or accepts liability arising from its use. Prior to making any decisions based on the information herein, you should determine, without reliance upon S3 Partners, the economic risks and merits, as well as the legal, tax, accounting and investment consequences, of such decision.

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