Codes Combine share falls after 'mysterious' hike
By Nam Hyun-woo
The share price of apparel company Codes Combine extended its shed on Friday, after swaying the overall market with its mysterious and extreme ups and downs earlier this month.
The loss-making apparel company’s share has created the so-called “Codes Combine frenzy,” as its stocks gained a whopping 700 percent in value this month without explanation. On Thursday, however, the price nosedived by a whopping 30 percent, raising concerns that “the time bomb will soon explode to hurt small investors.”
Codes Combine shares ended at 90,400 won on KOSDAQ Friday, down 8.41 percent from the day before. It is almost half the 184,100 won high posted on Wednesday. Also the company’s market cap, which swelled on Wednesday to 6.645 trillion won to surpass IT giant Kakao’s 6.642 trillion won, shrank to 3.42 trillion won after 501,333 shares were traded.
Kakao has the second-largest market cap on KOSDAQ, 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.
Korea's bourse operator on Wednesday launched a probe over such “mysterious” fluctuation, which led to distortions in the tech-heavy KOSDAQ market. The Korea Exchange (KRX) has ordered a number of securities firms to hand over ledgers and information on accounts that intensively made buy orders on the shares, but did not come up with suspicious manipulative forces.
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 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.
Meanwhile, other shares having small free floats are also displaying moves similar to Codes Combine, raising concerns over “speculative investment regardless of a company’s fundamentals.”
Medium-sized furniture maker Teems’ shares ended at 28,600 won, up 30 percent from a day earlier. Its shares also shot up to the price hike ceiling on Tuesday. The company also replied to a KRX inquiry that it could not explain. The company suffered a 1.1 billion won operating loss last year.