By Bansari Mayur Kamdar and Medha Singh
(Reuters) – Shares of AMTD Digital plunged 40% on Wednesday to spark a stunning rally fueled by retail investors this week that briefly lifted the Hong Kong-based fintech’s market value above that of Meta Platforms, owner of Facebook.
The company’s market capitalization closed above $300 billion in a 128% jump on Tuesday, reminding investors of the same stock market frenzy last year that led to record rallies in shares of companies such as GameStop and AMC.
The stock is up around 21,000% since its IPO in July, when it traded at $7.80. It was trading at $1014.98 on Wednesday.
“It’s very much like a pump and dump,” said Nate Anderson, founder of Hindenburg Research, adding that he doesn’t have a position in AMTD Digital. “It seems to have spread among retail investors, which is often the fuel for these situations.”
In a typical pump-and-dump pattern, investors create artificial demand to boost company stock prices, then sell their own shares at a profit, causing prices to plummet, overwhelming other investors with losses.
AMTD Digital was also the most mentioned stock on Reddit.com, the social media platform at the heart of the 2021 meme stock craze.
The company said on Tuesday that there have been no material changes or events related to the company’s business and operational activities since the date of the IPO and that it is monitoring stock volatility.
The fintech company, which provides loans and services to startups in exchange for fees, has a low float and is tightly controlled by parent company AMTD Idea.
AMTD Idea shares also fell 4% after the close on Tuesday with a market value of $2.6 billion.
“(AMTD Digital) is clearly the newest meme stock with groups of retail traders buying the stock at the same time, driving the price up sharply,” said Victoria Scholar, chief investment officer at Interactive Investor.
There has been a similar, but weaker, rise from some other recently listed US companies, including Getty Images which has jumped more than 200% since its July 25 debut.
“Were this market rally to carry more weight, we would expect retail investors’ appetite for speculative stocks to continue as they look for an opportunity to further pare the losses they have accumulated over the years. throughout the year,” said Lucas Mantle, data science analyst at Vanda Research.
GRAPH: Retail investors buy shares of AMTD and others (https://fingfx.thomsonreuters.com/gfx/mkt/znpnerezovl/Pasted%20image%201659539063394.png)
(Reporting by Bansari Mayur Kamdar and Medha Singh in Bengaluru; Editing by Saumyadeb Chakrabarty)