{"id":4809,"date":"2018-02-07T23:18:58","date_gmt":"2018-02-07T23:18:58","guid":{"rendered":"https:\/\/davidgerard.co.uk\/blockchain\/?p=4809"},"modified":"2018-07-11T21:14:49","modified_gmt":"2018-07-11T21:14:49","slug":"kodak-pt-4-kerrisdale-capitals-blistering-crypto-pre-mortem-for-kodak","status":"publish","type":"post","link":"https:\/\/davidgerard.co.uk\/blockchain\/2018\/02\/07\/kodak-pt-4-kerrisdale-capitals-blistering-crypto-pre-mortem-for-kodak\/","title":{"rendered":"Kodak pt 4: Kerrisdale Capital&#8217;s blistering crypto pre-mortem for Kodak"},"content":{"rendered":"<ul>\n<li><a href=\"https:\/\/davidgerard.co.uk\/blockchain\/2018\/01\/10\/kodaks-ico-for-a-stock-photo-site-that-doesnt-exist-yet-but-the-stock-price\/\">Part 1:<\/a> KodakCoin announced, stock price rockets<\/li>\n<li><a href=\"https:\/\/davidgerard.co.uk\/blockchain\/2018\/01\/10\/kodak-pt-2-photographers-cant-sell-kodakcoin-and-the-kodak-kashminer-is-a-bitcoin-mining-scam\/\">Part 2:<\/a> KodakCoin restrictions, the KashMiner scam<\/li>\n<li><a href=\"https:\/\/davidgerard.co.uk\/blockchain\/2018\/01\/12\/kodak-pt-3-kodakcoin-presale-prehistory-hot-takes-and-harsh-realities\/\">Part 3:<\/a> KodakCoin presale, prehistory, hot takes and harsh realities<\/li>\n<li><strong>Part 4: Kerrisdale Capital&#8217;s crypto pre-mortem for Kodak<\/strong><\/li>\n<li><a href=\"https:\/\/davidgerard.co.uk\/blockchain\/2018\/03\/08\/kodak-pt-5-kodakcoin-ico-light-paper-released\/\">Part 5:<\/a> The KodakCoin ICO Light Paper<\/li>\n<li><a href=\"https:\/\/davidgerard.co.uk\/blockchain\/2018\/05\/29\/kodak-pt-6-kodakcoins-on-sale-and-the-reg-a-escape-route\/\">Part 6:<\/a> KodakCoins on sale, and the Reg A+ escape route<\/li>\n<li><a href=\"https:\/\/davidgerard.co.uk\/blockchain\/2018\/07\/11\/kodak-pt-7-kodak-kashminer-the-bitcoin-cloud-mining-scheme-that-never-existed\/\">Part 7:<\/a> The KashMiner that never was<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<blockquote class=\"twitter-tweet\" data-width=\"550\" data-dnt=\"true\">\n<p lang=\"en\" dir=\"ltr\">Crypto. We haven&#39;t come across a theme this big since the Chinese frauds. First report coming tomorrow \u2013 blockchain fever won&#39;t save this company from bankruptcy.<\/p>\n<p>&mdash; Kerrisdale Capital (@KerrisdaleCap) <a href=\"https:\/\/twitter.com\/KerrisdaleCap\/status\/960986091498229761?ref_src=twsrc%5Etfw\">February 6, 2018<\/a><\/p><\/blockquote>\n<p><script async src=\"https:\/\/platform.twitter.com\/widgets.js\" charset=\"utf-8\"><\/script><\/p>\n<blockquote class=\"twitter-tweet\" data-width=\"550\" data-dnt=\"true\">\n<p lang=\"en\" dir=\"ltr\">We&#39;re short <a href=\"https:\/\/twitter.com\/search?q=%24KODK&amp;src=ctag&amp;ref_src=twsrc%5Etfw\">$KODK<\/a>. Report available at <a href=\"https:\/\/t.co\/iYzBSjzsqr\">https:\/\/t.co\/iYzBSjzsqr<\/a>. KODK&#39;s crypto ventures are worthless and the company is hurtling towards bankruptcy. 100% downside, HODL to zero. Conf call 10:30am (888-567-1603, reference Kerrisdale call) (1\/5)<\/p>\n<p>&mdash; Kerrisdale Capital (@KerrisdaleCap) <a href=\"https:\/\/twitter.com\/KerrisdaleCap\/status\/961245516989419520?ref_src=twsrc%5Etfw\">February 7, 2018<\/a><\/p><\/blockquote>\n<p><script async src=\"https:\/\/platform.twitter.com\/widgets.js\" charset=\"utf-8\"><\/script><\/p>\n<p>&nbsp;<\/p>\n<p><a href=\"https:\/\/www.kerrisdalecap.com\/\">Kerrisdale Capital<\/a> is a hedge fund. They buy and sell on the basis of extensive research. Today they released their report on Kodak \u2014 <a href=\"https:\/\/www.kerrisdalecap.com\/wp-content\/uploads\/2018\/02\/Eastman-Kodak-Company-KODK.pdf\">Eastman Kodak Company (KODK): Gone in a Flash<\/a>\u00a0\u2014 detailing Kodak&#8217;s <a href=\"https:\/\/davidgerard.co.uk\/blockchain\/2018\/01\/10\/kodaks-ico-for-a-stock-photo-site-that-doesnt-exist-yet-but-the-stock-price\/\">ridiculous KodakCoin offering,<\/a> and their even worse and <a href=\"https:\/\/davidgerard.co.uk\/blockchain\/2018\/01\/10\/kodak-pt-2-photographers-cant-sell-kodakcoin-and-the-kodak-kashminer-is-a-bitcoin-mining-scam\/\">blatantly fraudulent<\/a> KashMiner, to explain why Kerrisdale just shorted them.<\/p>\n<p>This is a startlingly well-researched, fabulously readable and <em>unremittingly brutal<\/em> report of just how comprehensively buggered Kodak is. It&#8217;s an amazing slice of journalism and I wish I&#8217;d written it. (I&#8217;m quoted in it, and <a href=\"https:\/\/davidgerard.co.uk\/blockchain\/book\/\">the book<\/a> gets a mention.)<\/p>\n<p>Obviously, they&#8217;re shorting the stock, so they&#8217;ll be as negative as they reasonably can be. But even given that, the writeup is relentlessly evidence-based and fully cited. It&#8217;s over-the-top because the facts are.<\/p>\n<p>&nbsp;<\/p>\n<p><a href=\"https:\/\/davidgerard.co.uk\/blockchain\/2018\/01\/10\/kodaks-ico-for-a-stock-photo-site-that-doesnt-exist-yet-but-the-stock-price\/kodak-kashminer\/\" rel=\"attachment wp-att-3993\"><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter size-full wp-image-3993\" src=\"https:\/\/davidgerard.co.uk\/blockchain\/wp-content\/uploads\/2018\/01\/kodak-kashminer.jpg\" alt=\"\" width=\"660\" height=\"371\" srcset=\"https:\/\/davidgerard.co.uk\/blockchain\/wp-content\/uploads\/2018\/01\/kodak-kashminer.jpg 660w, https:\/\/davidgerard.co.uk\/blockchain\/wp-content\/uploads\/2018\/01\/kodak-kashminer-300x169.jpg 300w\" sizes=\"auto, (max-width: 660px) 100vw, 660px\" \/><\/a><\/p>\n<p>&nbsp;<\/p>\n<p>The first page is a blistering rant that I&#8217;d be proud to have posted here:<\/p>\n<blockquote><p>A dying relic of American manufacturing licenses its brand to a blockchain project and immediately creates over $300m of value. Along the way Kodak board members conveniently grant themselves shares the day before the announcement, a stock promoter with a checkered past is engaged for PR, and a group of German copyright trolls reinvent themselves as blockchain-enabled image platform managers.<\/p>\n<p>&#8230; The use of blockchain in operating an image copyright platform accomplishes nothing. KODAKOne intends to utilize smart contracts and a crypto-asset to solve the problem of copyright infringement, but the business idea is flat-out silly. Cryptographically hashing an image into a blockchain doesn\u2019t prove the provenance of intellectual property, a blockchain does not reduce the resources necessary for copyright enforcement, no photographer would rather be paid in KODAKCoins over real money, etc. KODAKOne is little more than a moribund company\u2019s hollow attempt to chase the ICO craze. It\u2019s a PR stunt \u2013 a distraction that will pass when the company reports earnings and reminds investors of its distressed financial position.<\/p>\n<p>&#8230; Potential ICO proceeds and royalty payments from KODAKOne do not change the high probability of these events. Rather than dreaming of a \u201cnew economy\u201d for photographers, shareholders should be concerned about an eventual wipe-out. We view the equity as worthless, implying downside of -100%.<\/p><\/blockquote>\n<p>The proposed KodakOne stock photo site is a &#8220;transparent attempt to capitalize on speculative mania.&#8221; It does not offer a novel solution to an &#8220;unsolvable problem.&#8221; Cryptographic hashes of photos on the blockchain and a photo-centric private currency achieve nothing \u2014 &#8220;This is all unsubstantiated hype designed to entice investors.&#8221;<\/p>\n<p>KodakOne began as an <a href=\"https:\/\/davidgerard.co.uk\/blockchain\/2018\/01\/12\/kodak-pt-3-kodakcoin-presale-prehistory-hot-takes-and-harsh-realities\/\">aspiring copyright troll<\/a>, Ryde GmbH \u2014 who warned that you might be ruined by a copyright suit, so they kindly offered to check over your website and send you a bill for your infringements! This turned out not to be a winner. Ryde and Wenn Digital&#8217;s RydeCoin ICO didn&#8217;t work out either, so they pivoted to KodakCoin.<\/p>\n<p>KodakOne&#8217;s pitch is simple \u2014 &#8220;digital copyright infringement, combined with a lack of market transparency, is resulting in lost revenue for photographers.&#8221; The business model is automated copyright trolling:<\/p>\n<blockquote><p>We can get a photo, lock it into our blockchain, then we can sort of assign the IP to the individual, then we can look through the entire internet and find where that photo is being used, and if it&#8217;s not being used correctly, then we can reach out to them with an automated system<\/p><\/blockquote>\n<p>This is not how copyright works \u2014 if you don&#8217;t own the actual copyright, you can&#8217;t make a claim. (Which is why copyright trolls tend to threats of legal ruination, as in Ryde&#8217;s original pitch.) They seem to be relying on photographers not understanding this.<\/p>\n<p>The KodakCoin offering is just ridiculous. As I am quoted: &#8220;There is no reason any professional photographer would take Kodak-branded magic beans over actual money.&#8221;<\/p>\n<p>The tokens appear more saleable than I or <a href=\"https:\/\/www.bloomberg.com\/view\/articles\/2018-01-10\/good-luck-spending-your-kodakcoins\">Matt Levine<\/a> thought \u2014 506(c) tokens can be exchanged after one year &#8230; but only until there are 500 accredited or 2000 non-accredited holders. (The same loophole Uber uses to sell their stock without being a public company.) But no photographer is going to use this thing.<\/p>\n<p>Like all good cryptocurrency entrepreneurs, the KodakCoin team turn out to have an extensive track record in scams and fraud\u00a0\u2014 in this case, securities fraud. Cameron Chell, leader of the team, has been banned from a Canadian exchange for securities fraud, and has formed several businesses with people also convicted of securities fraud.<\/p>\n<p>KashMiner is dismissed forthwith \u2014 one heading states straight-up that &#8220;Kodak KashMiner is a scam&#8221; and another that it&#8217;s a &#8220;racket.&#8221; The scam is detailed <a href=\"https:\/\/davidgerard.co.uk\/blockchain\/2018\/01\/10\/kodak-pt-2-photographers-cant-sell-kodakcoin-and-the-kodak-kashminer-is-a-bitcoin-mining-scam\/\">much as I set out previously<\/a> \u2014 you are startlingly unlikely to come out ahead on this thing, and there&#8217;s no way they couldn&#8217;t have known this when they promoted it.<\/p>\n<p>These deals are desperation on the part of Eastman Kodak \u2014 their financial position hasn&#8217;t improved any since their last bankruptcy, they&#8217;re middling at best in the few profitable businesses they&#8217;re still in, they have cash on the balance sheet but half of it is stuck outside the US, and they can&#8217;t possibly avoid tripping <a href=\"https:\/\/en.wikipedia.org\/wiki\/Loan_covenant\">debt covenants<\/a> before the middle of next year, if not sooner. The numbers are set out in detail.<\/p>\n<p><a href=\"https:\/\/twitter.com\/buttcoin\">@Buttcoin<\/a> on Twitter <a href=\"https:\/\/twitter.com\/ButtCoin\/status\/961281815863595009\">welcomed Kerrisdale Capital<\/a> to &#8220;the Fraternal Order of Buttcoin&#8221; (warning: salty language) for this report. Kerrisdale <a href=\"https:\/\/twitter.com\/KerrisdaleCap\/status\/961285191833718785\">gracefully accepted:<\/a> &#8220;It\u2019s an honor, thank you.&#8221;<\/p>\n<p>If I have one qualm, it&#8217;s the statement at the start:<\/p>\n<blockquote><p>Blockchain and cryptocurrencies are exciting technologies with the potential to disrupt many industries; their use in media rights licensing by KODAKOne will not be one of them.<\/p><\/blockquote>\n<p>You&#8217;ll see reports like this say that &#8220;blockchain&#8221; is clearly bogus in their industry, but must have unspecified applications in <em>some other<\/em> industry.<\/p>\n<p>I&#8217;d like to see more bravery on this point\u00a0\u2014 you can say that &#8220;blockchain&#8221; is useless in a field and leave the false balance behind.<\/p>\n<p>Or just summarise all the evidence to date \u2014 <em>Blockchains are a terrible solution to a problem nobody turns out to have<\/em>. That works. Feel free to steal.<\/p>\n<br><br><div align=\"center\"><p><a href=\"https:\/\/www.patreon.com\/bePatron?u=8420236\"><img src=\"https:\/\/davidgerard.co.uk\/blockchain\/wp-content\/uploads\/2021\/10\/become_a_patron_button.svg\" alt=\"Become a Patron!\" title=\"Become a Patron!\" width=217 height=51><\/a><br><p style=\"align:center;\" class=\"patreon-badge\"><i>Your subscriptions keep this site going. <a href=\"https:\/\/www.patreon.com\/bePatron?u=8420236\">Sign up today!<\/a><\/i><\/p><\/div>","protected":false},"excerpt":{"rendered":"<p>This is the final word on Kodak&#8217;s crypto boondoggles. And it&#8217;s brutal.<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"inline_featured_image":false,"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[1],"tags":[74,9,376,458,370,371,372],"class_list":["post-4809","post","type-post","status-publish","format-standard","hentry","category-uncategorised","tag-blockchain","tag-ico","tag-kashminer","tag-kerrisdale-capital","tag-kodak","tag-kodakcoin","tag-kodakone"],"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/davidgerard.co.uk\/blockchain\/wp-json\/wp\/v2\/posts\/4809","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/davidgerard.co.uk\/blockchain\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/davidgerard.co.uk\/blockchain\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/davidgerard.co.uk\/blockchain\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/davidgerard.co.uk\/blockchain\/wp-json\/wp\/v2\/comments?post=4809"}],"version-history":[{"count":48,"href":"https:\/\/davidgerard.co.uk\/blockchain\/wp-json\/wp\/v2\/posts\/4809\/revisions"}],"predecessor-version":[{"id":8677,"href":"https:\/\/davidgerard.co.uk\/blockchain\/wp-json\/wp\/v2\/posts\/4809\/revisions\/8677"}],"wp:attachment":[{"href":"https:\/\/davidgerard.co.uk\/blockchain\/wp-json\/wp\/v2\/media?parent=4809"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/davidgerard.co.uk\/blockchain\/wp-json\/wp\/v2\/categories?post=4809"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/davidgerard.co.uk\/blockchain\/wp-json\/wp\/v2\/tags?post=4809"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}