AMTD Digital may be the new ‘perfect meme stock’, loses $100 billion in value in one day after rising more than 125%

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Shares of under-the-radar Hong Kong fintech firm AMTD Digital continued to fluctuate wildly in volatile trading on Wednesday after rallying more than 21,000% since its IPO last month, and while it’s still unclear what’s driving the wild price action, many compare it to the meme-stock frenzy of early 2021.

Key facts

Shares of AMTD Digital are up more than 1,500% in the past five trading days and are up 125% on Tuesday alone, as trading was halted several times due to volatility, although the stock fell back on Wednesday and fell 35%.

By the end of Tuesday, the stock was up 21,400% to over $1,600 a share, up from an IPO price of $7.80 on July 15, when it raised $125 million 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 HKD, is a wholly owned subsidiary of AMTD Idea Group (ticker: AMTD), a Chinese investment holding company that has itself gained nearly 200% so far this week.

In a statement earlier this week, AMTD Digital thanked investors for the successful IPO, but admitted that “to our knowledge, there are no material circumstances, events or other matters related to our company’s business and operational activities” that could trigger the run-up. declare the shares. price.

Comparisons are made with meme stocks gaining a cult-like following from investors collectively influencing the price of stocks, but it’s unclear if that’s the case here: “It’s a combination of a few things – a small float, a likely short-term interest rate and now the meme stock corner,” explains Brendan Ahern, chief investment officer at China-focused ETF provider KraneShares.

A quick look at popular forums like Wall Street Bets shows that until a few days ago the stock was relatively unheard of for many retail investors, many of whom warned others about AMTD Digital’s low earnings and skyrocketing valuation.

Crucial Quote

AMTD is “in some ways the perfect meme stock,” Ahern says. After the IPO, AMTD Digital had a very small IPO (shares publicly available in proportion to the total number issued), as AMTD Idea owns more than 95% of the company. In addition, there was likely a short squeeze, followed by retail investors starting to catch on, Ahern added.

Surprising fact

Before Wednesday’s decline, AMTD Digital’s market cap had risen to more than $300 billion, making it one of the most valuable companies in the US, ahead of big names like Bank of America, Disney and Coca-Cola. However, after scaling back recent gains on Wednesday, the company is now valued at about $200 billion. Parent company AMTD Idea, meanwhile, is valued at just under $3 billion.

chief critic

“So we’re all just going to ignore the $400 billion meme stash in the room?” famous shortseller Jim Chanos said on Twitter. “We literally had congressional hearings” on the $30 billion run-up in GameStop and AMC, “but just [crickets] Today.”

key background

AMTD Digital posted 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. AMTD launched its digital ‘metaverse’ platform, called SpiderNet, in February, although little details about the project have been disclosed on the company’s website or in the files. AMTD Digital and its parent company have also traded at relatively low volumes, which is unusual given their wild 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.

What to watch out for

“A Hong Kong-based fintech company brought back meme stock mania and put it on steroids,” said Edward Moya, senior market analyst at Oanda. “This latest fad is likely to see a rapid regulatory gauntlet.”

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