AMTD Digital May Be The New ‘Perfect Meme Stock,’ Loses $100 Billion In Value In One Day After Rising Over 125%

Topline

Shares of under-radar Hong Kong fintech firm AMTD Digital continued to swing wildly in volatile trading on Wednesday after rising more than 21,000% since its IPO last month, and while it’s still unclear not what sparked the wild price action, with many comparing it to the meme stock frenzy of early 2021.

Highlights

Shares of AMDD Digital have soared, rising more than 1,500% in the past five trading days and 125% on Tuesday alone as trading was halted several times due to volatility, although the stock fell to earth on Wednesday, down 35%.

By Tuesday’s close, the stock had jumped 21,400% to more than $1,600 per share from an IPO price of $7.80 on July 15, when it raised $125 million. dollars in what was the largest listing of a Chinese company on the New York Stock Exchange. This year.

AMTD Digital, which trades under the ticker symbol HKD, is a wholly-owned subsidiary of AMTD Idea Group (ticker: AMTD), a Chinese investment holding company which itself has gained almost 200% so far this week.

In a statement earlier this week, AMTD Digital thanked investors for the successful IPO, but admitted “to our knowledge, there are no material circumstances, events or other matters related to the commercial and operational activities of our company” which explain the rise in power of the action. the price.

Comparisons are drawn to stocks from memes that attract a cult following of investors who collectively influence stock prices, but it’s not clear if that’s the case here: “It’s a combination of a few things – a small float, likely short interest and now the same stock angle,” says Brendan Ahern, chief investment officer at China-focused ETF provider KraneShares.

A quick look at popular forums such as Wall Street Bets shows that until a few days ago the stock was relatively unknown to many retail investors, many of whom warned others about low earnings and the exorbitant valuation of AMDD Digital.

crucial quote

AMTD is “in some ways the perfect meme stock,” says Ahern. After its IPO, AMTD Digital had a very small free float (shares available to the public compared to the total number issued), because AMTD Idea owns more than 95% of the company. Additionally, there was likely a short squeeze, which is being followed by retail investors starting to get the hang of it, Ahern adds.

Surprising fact

Prior to Wednesday’s decline, AMDD Digital’s market capitalization had soared to more than $300 billion, making it one of the most valuable companies in the United States ahead of big names such as Bank of America, Disney and Coca Cola. However, after paring recent gains on Wednesday, the company is now valued at around $200 billion. Parent company AMTD Idea, meanwhile, is valued at just under $3 billion.

Chief Spokesperson

“So we’re all going to ignore the $400 billion stock of memes in the room? » famous short seller Jim Chanos said on Twitter. “We literally had congressional hearings ‘on the $30 billion in GameStop and AMC,’ but just [crickets] today.”

Key Context

AMTD Digital recorded just $25 million in revenue for 2021, according to regulatory filings, most of it in the form of fees and commissions from its digital financial services business. AMTD launched its “metaverse” digital platform, called SpiderNet, in February, although there are few details about the project listed on the company’s website or in filings. AMTD Digital and its parent company also trade at relatively low volumes, which is unusual given their high price swings. On Wednesday, AMTD Idea and AMTD Digital both saw volumes of around 80,000, compared to an average of 5.4 million and 1.1 million, respectively.

To monitor

“A Hong Kong-based fintech company just brought back the meme stock mania and put it on steroids,” says Edward Moya, senior market analyst at Oanda. “This latest fad will likely see a quick regulation gauntlet thrown its way.”

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