CNBC Said it First - Sahm Adrangi Predicts KodakCoin is Doomed
CNBC recently shared the negative report issued by Sahm Adrangi's Kerrisdale Capital. Their short position in the venture means its quid’s up for Kerrisdale if Kodak goes up in smoke. The truth is, that you can’t get anything past Sahm Adrangi. When it comes to failing companies, Yale-educated Sahm Adrangi has got laser vision. He says what everyone else is afraid to say, and predicts with precision when an organization is on its way out. Unfortunately for Kodak, the hedge-funder says they are headed for failure.
“Last ditch stock promotion gambit for a company hurtling towards bankruptcy.” These are words taken from a report by Kerrisdale Capital about Kodak’s attempt to use the success of blockchain technology to bolster their image and overinflate their stocks.
At the beginning of January, Kodak announced plans to implement an Initial Coin Offering. (ICO) Their main aim is to solve copyright issues using leverage from the new technology. They will be launching their own digital currency called KodakCoin. The coin will operate from KodakOne which is a blockchain platform. It will protect online images and their intellectual property rights. The Kodak name has also been licensed to Kodak Kashminer which is a digital currency mining product.
Kodak had a 37% increase in stocks as well as a significant period of high performance after the announcement was made. However, despite their apparent success, Kerrisdale Capital is not confident about their longevity. They have referred to their new business venture as nothing but a publicity stunt in an attempt to rescue a drowning company. Kerrisdale doesn’t believe that the organization is capable of competing against other blockchain start-ups. There is already a possibility that Kodak could go into default, and within the next few years, they may go into debt restructuring. This is why the investment manager is arguing that the company doesn’t have the funding, or the technological capacity to successfully integrate this new blockchain technology.
The report begins by stating that using blockchain technology to track intellectual property will fail. To make such a claim is giving photographers false hope that their copyright will be “magically enforced.” Kodak has not provided a viable explanation of how they intend on achieving this. Kerrisdale doesn't believe that using blockchain for an image rights management platform will be of any benefit to the users.
Kodak made the mistake of hiring Cameron Chell, the CEO of AppCoin to facilitate their ICO. According to investigations conducted by Kerrisdale, Chell is the business partner of a convicted securities fraudster. In 1998, Chell received a five-year ban from the Alberta stock exchange. It has also been found that five members of the Kodak board have been involved in dubious trading. Prior to the blockchain announcement, five board members assigned themselves six digits of restricted stock units. This accusation may lead to an SEC investigation.
The negative report was picked up by CNBC, and several other online sources claim that Kodak has overinflated payouts guaranteed by the Kashminers. Their contract guarantees that investors will receive a $375 per month payout. Kerrisdale is highly suspicious of their claims because they have not taken into consideration that there are two important components associated with bitcoin mining: Network difficulty and price swings.
It is almost impossible for a company to accurately estimate how much a miner can make due to the capricious nature of bitcoin price swings. Also, as the mining network increases, so does the difficulty level, and this has a negative effect on profit.
The report is packed full of insightful information, here are some of the main highlights:
- Descriptions of an “encrypted, digital ledger,” and “Al-enabled image recognition” are just buzzwords – there is no practical advantage to using blockchain for an image rights management platform, and even less for a “photo-centric” cryptocurrency.
- Cryptographic hashing will not prove the provenance of IP and using blockchain does not diminish the resources necessary for infringement detection and enforcement.
- The KodakCoin ICO is only being offered to “accredited investors.” Unless photographers meet the necessary financial qualifications, they will not be able to participate in the ICO. Rather than “democratizing photography,” KodakCoin faces a slew of restrictions that greatly hinder its adoption as a means of exchange.
- These technological and legal problems will render the platform unworkable. As a blockchain expert, we spoke with put it, “When the mania goes, this will go with it, and what will be left will be a dry husk of a software application that will never do what it was marketed to do.”
- Appcoin is deeply intertwined financially and operationally with WENN Digital and the planned KodakCoin ICO. AppCoin has only 2 executive officers and zero employees.
- A highly regarded, well-connected blockchain developer with over 20k Twitter followers, and named by Fortune magazine as one of the top accounts to follow on Twitter for is insights on cryptocurrency, had this to say about the KodakCoin ICO and its developers:
“No one I know who is reputable – nobody – has said anything good about this scheme. These are people not necessarily sceptics; these are people who are working on lightning, and people who work on Bitcoin, and people who are really tight with the whole Ethereum crew, so these are people who have been around and are quite bullish on crypto generally, and even they look at the Kodak thing and say “we’re very wary of this, we don’t know who’s running it we’re not familiar with them, we haven’t seen them before.”
Sahm Adrangi's Kerisdale report concludes that Kodak’s latest marketing ploy is simply an attempt to distract investors from the fact that they are moments away from financial ruin. They are on the brink of total collapse and this is their way of cashing in on a failing company that is $600 million in debt! Kodak is yet to respond to the Kerrisdale report.
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