Why Is Magic Empire Global (MEGL) Stock Up 2,000% Today?

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On an otherwise depressed day in the market, some stocks are generating incredible interest. Worldwide magic empire (NASDAQ:DELG) is one such name; MEGL stock made its debut today to applause from investors. As of this writing, the stock is up more than 2,000% on its first day of trading.

Magic Empire Global announced the price for its initial public offering (IPO) yesterday, pricing 5 million shares at $4 per share. This fundraising of $20 million — for a company whose turnover is less than $17 million — is significant. However, the shares’ incredible rise to the $90 level raised questions about whether the IPO was misplaced.

In general, while IPOs tend to be priced attractively to provide some capital appreciation for early investors, this does not appear to be the case with MEGL shares. So, let’s dive into the potential drivers of this top-flight stock.

Why is MEGL stock soaring today?

Hong Kong-based Magic Empire Global is a rather interesting company to review. The financial services company is focused on underwriting and corporate financial advisory services. As a result, many investors can draw parallels between Magic Empire and Digital AMTD (NYSE:HKD), which also skyrocketed recently after its IPO.

Like Magic Empire, AMTD is a financial services company focused on digital banking technology as well as other finance-related services. Both companies have similar revenues, but have grown in a very short time.

Speculators looking for outsized potential gains appear to be targeting foreign stocks with low free floats and relatively weak price-per-share metrics. MEGL and AMTD stocks provide similar fundamentals and insight into how meme traders are pricing the markets right now.

It remains to be seen whether this race can continue any longer. With AMTD stock now valued at over $100 billion – a valuation that makes no sense – it’s possible Magic Empire could follow suit, leading to more speculative buying in the near term.

That said, both companies represent extreme levels of risk. Therefore, I am of the view that these stocks are untouchable at present, except for those looking to take a short to medium term conservative stance.

As of the date of publication, Chris MacDonald did not hold (either directly or indirectly) any position in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com publishing guidelines.

Chris MacDonald’s love of investing has led him to pursue an MBA in finance and take on a number of management roles in corporate finance and venture capital over the past 15 years. His experience as a financial analyst in the past, coupled with his fervor for finding undervalued growth opportunities, contribute to his conservative long-term investment outlook.

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