Korea Exchange has found no evidence of foul play in the rally of Codes Combine on the Kosdaq exchange in March, the sudden and erratic nature of which led the bourse operator to take measures against stocks with similarly small free floats.

“The Market Oversight Committee could not find any reason to believe that manipulative forces were behind the stock’s gains,” a source at the KRX said Sunday. The committee, which monitors irregularities in stock trading, had probed transactions related to the share’s near-560 percent spike between March 3 and 15. 


Shares in Codes Combine, which traded at around 23,000 won before the rally, shot up to a record-high closing price of 151,000 won during the mysterious upswing. On May 4, the most recent trading session, they closed at 59,900 won.

The spike had stoked suspicions of price rigging, as the apparel maker logged operating losses for four consecutive years and was on the watch list for potential stock market delisting.

It was revealed later that one day before the rally began, the FTSE, a global index provider that is tracked by major global funds, had added the Korean firm to its global small cap list. Experts also said that the stock’s small free float may have been a key reason behind its high volatility.

Only 0.6 percent of Codes Combine’s total outstanding shares, or 250,000 shares, are publicly trading, as the rest is locked up in the hands of the firm’s largest shareholder Cotton Club and creditors.

KRX revised rules to suspend trading in stocks whose free floats are less than 100,000 shares, or below 2 percent of total outstanding shares.


By Lee Sun-young
(milaya@heraldcorp.com)