The Eastman Kodak Company (NYSE: KDK) is proving that desperation is the true mother of innovation. The venerable photography supplier has entered the cryptocurrency business.
Kodak unveiled a branded cryptocurrency mining rig called the KashMiner at the CES tech extravaganza in Las Vegas, the BBC reported. The company also announced plans to install mining rigs at its Rochester, New York, headquarters and rent or lease mining rigs to the public. That sounds as if Kodak intends to start a mining pool, news stories did not say the company plans a mining operation in Iceland like Long Blockchain (NYSE: LBCC).
Is the Kodak KashMiner a Good Investment?
It is not clear what cryptocurrencies Kodak intends to mine. News stories only mentioned Bitcoin (BTC), but it is safe to assume Kodak will be mining other major currencies like Ethereum (ETH) and DASH. Since most journalists believe Bitcoin is the only cryptocurrency they probably did not ask that obvious question.
The public will be able to rent the KashMiner for two years for $3,400 (€2,781.37). Kodak hopes to make money by taking half the cryptocurrency mined as payment. The KashMiner is supposed to harvest $375 (€306.77) worth of Bitcoin a month from the Blockchain, CNBC reported.
Kodak would take half of that – giving users a $187.50 (€153.38) a month profit. At such a rate it would take around 19 months to pay off the $3,400 (€2,781.37) lease. News stories did not say how much you can make mining other cryptocurrencies with the KashMiner. Note: I was unable to find the Kodak KashMiner for sale on Amazon – if it is a real product one would think it would be there.
Kodak Plans ICO and Blockchain Photography
The company’s plans go far beyond mining; a blockchain platform for photography and a cryptocurrency called Kodak Coin are also on the drawing board.
“Utilizing blockchain technology, the KODAKOne platform will create an encrypted, digital ledger of rights ownership for photographers to register both new and archive work that they can then license within the platform,” the elevator pitch for the platform states. The cryptocurrency will be used to monetize photography via the platform, Tech Crunch reported.
“With Kodak Coin, participating photographers are invited to take part in a new economy for photography, receive payment for licensing their work immediately upon sale, and for both professional and amateur photographers, sell their work confidently on a secure blockchain platform,” a Kodak press release stated.
The initial cryptocurrency offering (ICO) for Kodak Coin is scheduled for 31 January 2018, Tech Crunch reported. Many details of the ICO such as whether the coin will be an ERC20 (Ethereum-based) currency were not included in news stories. Since the word Ethereum is not mentioned on the Kodak Coin website, it is safe to assume Kodak Coin is not Ethereum based.
The Kodak Coin was described as a “cryptocurrency” for photographers by Coindesk. Kodak Coin would apparently be used to buy and sell photography rights on Kodak Coin. The value of the Kodak Coin ICO is unknown at this time.
Is Eastman Kodak Making Money?
It is easy to see why Kodak is interested in ICOs and cryptocurrency mining. The company desperately needs all the money it can get.
The Eastman Kodak Company reported revenues of $379 million (€310.04 million), a gross profit of $87 million (€71.17 million), an operating loss of -$54 million, and a loss of -$46 million (-€37.63 million) on September 30, 2017, Stockrow data indicates. The company also reported an operating cash flow of $3 million (€2.45 million), and a negative free cash flow of -$14 million (€11.45 million) on the same day.
To make the situation more dismal, Kodak’s revenues shrank by 7.79% during third quarter 2017. This company desperately needs all the cash it can get just to pay the bills.
After reading these numbers one has to wonder how Kodak plans to pay for the electricity needed to run those mining rigs. Since mining rigs are notorious hogs, it will have to explain that. One interesting idea would be to install Solar Panels like those from Tesla’s (NASDAQ: TSLA) SolarCity on its roof. Note: that might not work because Kodak would have to pay for the solar panels.
Kodak’s Only Value is its NYSE Listing
The financial numbers tell us that there is only one asset of value at Kodak; its’ listing on the New York Stock Exchange (NYSE).
The listing is valuable because of the difficulty and high cost of doing an initial public offering (IPO) these days. It is far cheaper to buy a company with an existing listing and change its business plan to issue a new stock. The idea is hardly new, Warren Buffett did it successfully back in 1965 with a broken-down textile manufacturer called Berkshire Hathaway (NYSE: BRK.A).
Expect to see other cryptocurrency entrepreneurs follow Kodak’s lead by buying cheap companies to get their hands on a stock and a listing. Speculators might make some money by identifying low-cost companies with a stock that ICO promoters might target.
There is nothing else of value at Kodak, it reported assets of $1.618 million (€1.32 million) and $353 million (€288.77 million) in cash and short-term investments on September 30, 2017. Those assets are about the same value as that of a small-town supermarket. Actually, the small-town supermarket might be more valuable because it would presumably generate some cash through sales.
Can Cryptocurrency Mining Generate Float?
The business plans of companies like Long Blockchain and Kodak will certainly put cryptocurrency to the test. These corporations are betting on cryptocurrency mining’s ability to generate float.
Float is Warren Buffett’s term for a stream of constant cash a company can tap as a source of additional revenue, or to borrow against. Two classic sources of float are insurance policy premiums and payments or leases on new cars.
The Buffett Berkshire business model; which Long and Kodak are trying to emulate, is to find a source of float. Then use that float to finance other investments in an attempt to grow the company.
Long intends to use cryptocurrency mining as float. Kodak plans to generate float from the KashMiner leases, cryptocurrency mining, and from the KODAKOne platform. A potential source of income on KODAK one would be charging for storage or transmission of digital photographs.
The Grave Risks Kodak is taking
The risks Kodak is taking here are vast because the plan is unproven. Cryptocurrency mining is a proven source of cash but the other ideas are new. Nobody knows if they are worth the risk.
A greater threat is regulators like the Securities and Exchange Commission (SEC). Such entities are likely to see Kodak’s business plan as an effort to get around the laws governing stocks. We are likely to see the SEC and other regulators go after companies like Long and Kodak in the near future.
Despite those risks Kodak would be a good speculative stock because it is super cheap. KODK was trading at $10 (€8.18) a share on January 19, 2018. If you want to put a few shares of a cryptocurrency-related speculative stock in your portfolio Kodak would be a good choice.
Do not put a lot of money in Kodak stock or Kodak Coin because the business plan is totally unproven. Personally, I would stay away from Kodak Coin because it might not be easily converted into a proven altcoin like Ethereum.
Kodak will either prove that cryptocurrency is a cash cow, or demonstrate its risks. Either way, this company’s experiments will be fun to watch.
Disclaimer: This commentary is intended as food for thought, not as financial or investment advice!! Please, folks, do your own research and thinking.
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