Bosses at Japanese internet company Livedoor have denied it broke market rules by giving misleading information to shareholders.
Mr Horie has been an outspoken critic of Japan's business elite
Livedoor shares fell by 14.4% on Tuesday - the maximum decline allowed under stock market rules.
Shares in the firm plunged after prosecutors raided the firm's Tokyo offices late on Monday.
Other Japanese internet stocks like Yahoo Japan and Softbank also slumped, while the Nikkei index fell nearly 3%.
President and chief executive Takafumi Horie said Livedoor was now conducting its own investigations into the allegations.
"A thorough investigation of our company will show that we have not done anything illegal," Ryoji Miyauchi, who is in charge of Livedoor's finances, told Bloomberg.
The Tokyo District Prosecutor's office said it and the Securities and Exchange Surveillance Commission were investigating Livedoor for spreading false information related to shares in a subsidiary.
The investigation is thought to involve the predecessor company to Livedoor Marketing, a separately listed subsidiary that was also raided on Monday.
It is alleged that, in an effort to boost its share price, it announced last October that it would acquire a publisher, despite the fact that it already owned the company.
One of Japan's best known internet companies, Livedoor has grown rapidly through a series of takeovers and stock splits into a group with a value of about 730bn yen ($6.3bn; £3.6bn) before Tuesday's share price fall.
Livedoor's chief Takafumi Horie, 33, is a well-known personality in Japan.
The outspoken entrepreneur, a university dropout, shot to fame following separate failed attempts to buy a TV company and a baseball team.
He also unsuccessfully ran in parliamentary elections last year as an independent candidate supported by the ruling Liberal Democratic Party.