What have you done Kodak, what have you done? Earlier this month, the stalwart film company got into bed with the oh-so-tempting blockchain brigade, and its stock price dutifully shot up. With one day to go before its initial coin offering, more details have emerged about this unholy marriage, and it’s easy to believe that the reincarnated Kodak isn’t long for this world.
(Update: Kodak has delayed its ICO, further details at the bottom of the post.)
After announcing its ICO, KodakCoin, the Rochester-based company’s beleaguered stock price went up by 44 percent, and it’s hung on for the last few weeks. Since February of last year, the markets had steadily eaten away at Kodak’s stock, but the wave of random companies getting investment capital by announcing ICOs came along, and crypto-fever took hold. But unlike the owner of a string of Hooters franchises or the Long Island Iced Tea Corp, both of which locked their futures onto the blockchain, Kodak’s CEO insisted that KodakCoin made sense with its brand.
An ICO is similar to the process of a company issuing a public offering of its stock, but the money invested can go toward growing the company and often purchases a form of cryptocurrency for the investor. In the case of KodakCoin, investors are being given the chance to buy tokens that will be used on a blockchain-based registry for photo copyrights. The idea is that a photographer will upload a photo to Kodak’s blockchain, and transactions with people who buy the rights to that photo will be handled in the public ledger. A rights buyer will purchase KodakCoins with dollars, pay the photographer with the coins, and the photographer can exchange the coins back to dollars if they so choose. Maybe they’ll hold on to the coins and they’ll go up in value, who knows!?
The New York Times interviewed the people behind KodakCoin to get a better idea of what’s going on here, and their findings are troubling.
Jeff Clarke, Kodak’s chief executive, insisted that this wasn’t a desperate deal designed to jump on the ICO fad. He told the Times that he’s been studying the blockchain since last summer as he formulated plans to continue the company’s adaptation to a digital world.
But it turns out, Kodak’s position in this deal is mostly just a branding deal. Wenn Digital, a company that focuses on licensing paparazzi photos, is the primary player behind the ICO. According to the Times, Kodak “will receive a minority stake in WENN Digital, 3 percent of all KodakCoins issued and a royalty on future revenue,” for the use of its name.
Okay, but that at least means that Kodak’s exposure in the deal is limited, right? I mean, if it’s just giving up its name, then all it’s risking is damage to its brand. And Kodak is way more than a bran... Uh oh. From the Times:
Cameron Chell, a lead adviser to the KodakCoin project, told me that the initial offering represented a “seminal moment” for Kodak, and that the company’s interest in blockchain technology was a savvy long-term investment.
But Mr. Chell, a Canadian entrepreneur and motivational speaker who once opened for Tony Robbins, has a troubled track record. In 1998, Mr. Chell agreed to a five-year ban from the Alberta Stock Exchange in Canada and paid a $25,000 fine in connection with a violation of the exchange’s rules. A previous company of his ended in ignominy after its chairman was charged with fraud.
A Kodak spokesman did not return a request for comment about Mr. Chell and whether it knew about the ban.
That’s not a great sign. But hey, it’s hard to get into the ICO world without working with some people who might not have the greatest track record. And Kodak is following the SEC’s guidelines and regulations for a security token offering to accredited investors. That should make people feel a little better. But wait, according to the Times, those guidelines mean that only people with more than $1 million or an annual income that exceeds $200,000 can actually purchase KodakCoins tokens. So, only millionaire paparazzi and wedding photographers can get in on this service.
We haven’t even covered the cheap coin miner with a Kodak sticker slapped on it that the company is selling. It’ll never make the mining goals it claims in its promotional materials, but we’re just piling on now.
Bloomberg reported this afternoon that Wall Street is already placing its bets that Kodak’s stock is going to take a big hit following the ICO debut tonight. Financial analytics firm S3 Partners says that “about one-third of Kodak’s shares are traded as short positions.” In other words, a third of the people playing with Kodak shares are hoping it tanks.
If it were any other company latching onto the ICO craze, I’d say let ‘em burn. But this is Kodak. Most of your favorite movies were probably shot on Kodak film. Most of the photos you shot before digital cameras took over were probably shot on Kodak film. By most accounts, this was a good company for the town it was based in and the people that worked for it. Sure, it’s gone bankrupt before and was likely headed that way once again, but it seems like such a shame to see its final chapter marred by a dumb cryptocurrency debacle.
Maybe it won’t die, but it’s hard to shake the feeling of Kodak as Sunset Boulevard’s Norma Desmond, wandering around her old house, waiting for her comeback. The dashing young blockchain as Joe Gillis coming in to offer hope and a vision for the future. “You used to be in silent pictures, you used to be big,” the blockchain tells Kodak. “I am big. It’s the pictures that got small,” Kodak says after slowly taking a drag from its cigarette holder. And nothing but betrayal and misery ensues as it becomes clear that neither of these romantics has a chance.
Play us out, Paul...
Update: According to New York Times reporter Kevin Roose, the KodakCoin ICO has been delayed for “several weeks” while the company sorts through the 40,000 investors who are interested and verifies that they qualify as accredited investors.