Scandal of Codes Combine
It turned out that an apparel company Codes Combine’s share price recently showed an unexplainable hike for nine consecutive business days as it was added in the FTSE SmallCap Index. The Korea Exchange (KRX) notified to FTSE, which included Codes Combine in its global indexes, that the company has serious problems in liquidity and performance. However, FSTE ignored the notice.
The KRX said on March 23 that it let the U.K.-based organization know Codes Combine’s actual outstanding stock ratio and the fact that it was chosen as administrative issues on the 15th, two weeks after FTSE Group added the company in its SmallCap Index on the 2nd.
A senior official from the KRX said, “Last week, we told FTSE that Codes Combine has few outstanding shares, which means its current market capitalization is much more overvalued than the actual figure, and it was designated as administrative issues due to its performance deterioration in recent years.
However, FTSE had no comment on it even a week later. Investment banking sources expected that it will be difficult for FTSE to exclude Codes Combine from the index considering the stability and credibility of the index, though FTSE recognized Codes Combine’s problems later. Accordingly, FTSE is highly likely to except Codes Combine from the index in September during its regular index update as of now.
With the aftermath of Codes Combine’s explosive rally and concerns from the KRX, shares in Codes Combine skyrocketed by over 27 percent to end at 98,700 won (US$84) on KOSDAQ on the same day, showing a mysterious rally again.