At this year’s CES 2018, Eastman Kodak (“Kodak”) announced new initiatives, KODAKOne and Kodak KashMiner, both licensing deals of the fabled trademark marking its foray into the world of cryptocurrency. On news of the ventures, Kodak’s stock price soared, tripling in value before sliding back to a still-high doubling of value.
Partnering with a new company called WENN Digital, KODAKOne is intended to be an image rights management platform designed to protect visual artists from copyright infringement. KODAKOne is banking on the idea of scanning the internet for copyright infringers and demanding payment for continued use. Kodak will pay IP owners a share of the payments in KODAKCoin, a cryptocurrency baked into its proprietary system.
Kodak KashMiner is a Kodak-branded Bitcoin mining rig from Spotlite. The offer for leasing is $3,400 for a 24-month contract, with a 50/50 split with Spotlite, which owns the rigs. Using KashMiner’s example, it would take just 9 months to break-even on the contract, assuming a remarkably optimistic, sustained Bitcoin value of $14,000 (Bitcoin hovers around half that value at this writing).
Sahm Adrangi Wades Through Kodak Hype
Not so fast, says Sahm Adrangi, CIO of Kerrisdale Capital. In his just-released report on Kodak, Adrangi blasts the idea that KODAKOne supports the resulting valuation increase for Kodak. Before even getting into the financials, Adrangi lays out the case that KODAKOne does not bring anything new to existing rights management except a public-relations-spinning buzz around cryptocurrency. Consulting with experts in the crypto community finds no confidence–or credibility–in the process Kodak is hoping to capitalize on.
CNBC was quick to pick up the report. The reputation of the entire management team behind WENN Digital and KODAKOne raises questions. From dubious pre-announcement stock awards to board members, a history of SEC penalties for various fraudulent activities by management team members, to a lack of any employees at all working for WENN Digital, the stage seems set for a farce to unfold, rather than a dynamic new direction for an old company.
Meanwhile, Kodak’s licensing deal with Spotlight for Kodak KashMiner raised eyebrows over its mining rig product. Based on visual evidence to date, the rig seems like nothing more than a rebranded existing product that also brings nothing new to the crypto table. With the rather dubious promotion of easy earn-out on the leasing price, plus the long history of scams in this product space, KashMiner already looks bound to failure.
In a further twist, Eastman Kodak CEO Jeff Clark himself noted at the CES 2018 announcement: “This doesn’t change the fundamentals in a way that means the stock should double.” In search for an answer to the strange situation where even a company CEO is acknowledging its own hype is hype, Adrangi takes a look at Kodak’s financials.
By the numbers, what he finds isn’t an answer Kodak will like.
In his scathing conclusion, the once-venerable Kodak has become a flailing company with poor execution, an uncompetitive product set, and lack of operational visibility. KODAKOne and Kodak KashMiner seem like desperate attempts to mask deep structural issues with the company and its products and services. Kerrisdale Capital’s Sahm Adrangi has gone short on Kodak.