Stock manipulation angle bubbles up in Top Pot Bakery additive scandal
CNATAIPEI -- Taipei Prosecutors have begun investigating possible connections between an upscale bakery's false advertising scandal and wild swings in the stock price of the bakery's parent company.
August 29, 2013, 11:44 am TWN
Taipei-based bakery chain Top Pot Bakery was found last week to be using artificial flavorings while labeling its products as using all-natural ingredients, earning the company a fine and forcing it to shut down for three days to regroup.
Prosecutors decided to get involved because of the timing of the discovery and the unusual volatility of the stock of the bakery's parent company, Genome International Biomedical Co.
Genome International Biomedical's shares plummeted from NT$124 on Aug. 1 to NT$96 on Aug. 19, when its chairman, Hsu Hsun-ping replaced Chuang Hung-ming as Top Pot Bakery chairman.
Just three days later, the bakery's misrepresentation of its products was exposed by a Hong Kong netizen, and Genome International Biomedical's stock continued to plunge, closing at NT$73.80 on Wednesday.
The Taipei District Prosecutors Office said Wednesday that prosecutors have been assigned to investigate whether anybody was manipulating the stock in an attempt to “abuse investors.”
Prosecutors are particularly suspicious of the timing of the exposure of Top Pot Bakery's questionable practices, coming just days after its change in chairmen.
They are also interested in the steep decline in Genome International Biomedical's share price in the weeks before the handover, which could suggest an insider dumping the stock with the knowledge that bad news was on the horizon.
Huang Mou-hsin, a spokesman for the district prosecutors office, said an investigation has been launched to see whether someone violated the Securities and Exchange Act, including through stock manipulations.
Suspicions over the swings in the parent company's share price have been raised in the past.
Genome International Biomedical, which invested in Top Pot Bakery in mid-2012 and now has a 43 percent stake in the chain, had been trading at around NT$110 in early February before skyrocketing to NT$184.50 on Feb. 27.
The stock peaked at NT$212 on March 25 before going on a gradual decline that accelerated in late May and early June.
Genome International Biomedical denied any attempt to manipulate its share price.
“Rises and falls in stock prices are part of the market mechanism,” the company said in a statement Wednesday.
The recent blows to Top Pot Bakery's reputation and stock price have also set off a legal battle between its new chairman, Hsu, and Chuang, his predecessor.
Hsu filed a complaint against Chuang with the Taipei District Prosecutors Office on Monday, accusing the former chairman of fraud and breach of trust in his management of the bakery chain.
Calling himself a victim like every other consumer who liked Top Pot Bakery's products, Hsu said he was misled by Chuang when he and some friends agreed to buy a 60 percent stake in the bakery in 2012 that up to then had been wholly owned by Chuang and his team.