KRX launches probe over 'mysterious' stock price surge
By Nam Hyun-woo
Korea’s bourse operator on Wednesday launched a probe over a “mysterious” fluctuation of an apparel brand’s share price, which led to distortions in the tech-heavy KOSDAQ market.
The Korea Exchange (KRX) said that it has ordered a number of securities firms to hand over ledgers and information on accounts that intensively made buy orders on shares of apparel company Codes Combine, under suspicion of stock price manipulation. Those firms include Goldman Sachs, Morgan Stanley and Nomura.
The company’s share price has been showing an unexplainable hike for nine consecutive business days since March 3. Its price has jumped more than sixfold from 23,200 won over that period and risen by the daily limit for four straight days. Trading of Codes Combine shares was suspended on March 10, but the rally lasted until Tuesday.
The price on Wednesday ended at 141,000 won ($118), down 6.68 percent from 151,100 won a day earlier, but displayed high volatility during the day, with its market cap once swelling to 6.645 trillion won to surpass IT giant Kakao’s 6.642 trillion won.
Kakao has the second-largest market cap, following Celltrion, a biopharmaceutical company with some 11.9 trillion won. Given the fact that the apparel company has seen red numbers for several business years, such a hike is seemingly unexplainable, for which the company said it could not offer any explanation.
A KRX official said it will conduct an investigation on whether there was any intent to manipulate stock prices. Should the KRX find evidence of price rigging, it will report to the Financial Services Commission (FSC). If the regulator finds more evidence, the Securities and Futures Commission will alert prosecutors.
The total outstanding shares of Codes Combine are worth 37.8 million, but more than 99 percent of them are locked up by its largest shareholder Cotton Club and other creditors, with some 250,000 shares publicly traded. Experts say high volatility is oftentimes observed in an item with a small number of free floats.
As the company’s share price shot up, KOSDAQ reached the 700 mark, but the KRX sees the index as seemingly distorted.
“The KRX is paying keen attention to the situation,” the official said. “It is working on coming up with measures to prevent potential distortion, but it is not fixed when we will disclose such measures because the Codes Combine price is showing signs of stability.”
In 2014, Codes Combine recorded a net loss of 23.8 billion won. Its operating losses were also extended to 29.9 billion won in the same year.