The stockbrokers are puzzled: a small financial company from Hong Kong has risen to become one of the most valuable companies on Wall Street in the past few days. AMTD Digital’s stock went public on July 15 at the initial offering price of $7.80. It peaked last Wednesday at $2,555. The course rose by a factor of 320. The market value reached up to 400 billion dollars (equivalent to 390 billion euros). The company, which hardly anyone knew until recently, was worth as much as Meta, the parent company of Facebook.
There are no “fundamental reasons,” as stock market experts call it, for a company to greatly increase earnings or earnings prospects. Means: The price increase is pure fantasy. In many ways, the case is reminiscent of the events surrounding the shares of the computer game chain Gamestop, the price of which literally exploded in early 2021. This was mainly due to social media such as the Internet platform Reddit, on which small investors encouraged each other to buy shares. They were so successful at it that they brought down large hedge funds that had bet against Gamestop. As the price rose, these shares had to buy more, which drove the price further, a so-called short squeeze. This is particularly possible with narrow values, i.e. companies of which there are not many shares on the market.
Even at AMTD Digital – a financial service provider that specializes in digital business – analysts are now pointing to the tiny free float: most of the shares are held by large investors, only a few papers are traded on the stock exchange. In this way, large price jumps can be generated with comparatively little capital. In addition, AMTD Digital was recently the most frequently mentioned stock on the Reddit platform, which has already played a decisive role at Gamestop. “AMTD is the latest ‘meme’ stock,” said Victoria Scholar, a manager at investment firm Interactive Investor. By this, stockbrokers understand shares whose price is mainly driven by hype in the social media without there being “fundamental reasons” for it. And then there was the assumption that there could be a mix-up: AMTD Digital trades on the stock exchange under the abbreviation HKD, the same abbreviation as for the Hong Kong dollar. Did investors actually want to buy a currency instead of the share?
Quite a lot of inconsistencies
Some things that became known about AMTD Digital itself are also strange. The ownership structure is confused. Ultimately, it leads to Calvin Choi, a former banker at the major Swiss bank UBS. He is accused in Hong Kong of violating the obligation to disclose conflicts of interest. Nonetheless, on July 15, he rang the bell on Wall Street to announce AMTD Digital’s IPO.
The parent company AMTD Group was founded in Hong Kong in 2003 with the support of billionaire Li Ka-shing. The Lo family, one of the largest real estate owners in Hong Kong, is one of the group’s patrons. Another investor is the China Minsheng Investment Group, which Choi installed as boss years ago. In the meantime, however, she has turned against him; at times she even accused him of fraud on banners in central Hong Kong. Founder Li Ka-shing announced on Thursday that he would sell his 4 percent stake in AMTD.
Quite a lot of inconsistencies for a company that has risen to become one of the most valuable companies on the stock market. It’s no wonder that analysts who can’t explain the price explosion are skeptical. “Looking at the rate of increase, I have a feeling it’s going to nosedive,” says Oktay Kavrak of trading firm Leverage Shares. AMTD Digital stock closed on Wall Street on Thursday at $800 — two-thirds below its high.