(Bloomberg) — Even after a retail frenzy that saw GameStop Corp. become the world’s hottest stock and a dog-themed joke cryptocurrency gain billions in value, the whirlwind trade in an obscure financial business Hong Kong stands out as spectacular.
Bloomberg’s Most Read
The rapid rise of AMTD Digital Inc., a barely profitable financial services firm, is a story that, while reminiscent of last year’s meme-stock frenzy, is even more mysterious. In a move that has baffled the financial community, shares of the company soared in less than three weeks from its initial public offering price of $7.80 to an intraday high of $2,555, a stunning jump of more than 32,000%.
Perhaps even more puzzling, unlike other publicly traded financial giants that report hundreds of billions of dollars in revenue each year, AMTD’s IPO prospectus lists total sales of just $25 million for the year ended. in April 2021. Still, that didn’t stop the company from trading. value of soaring to $310 billion as of Tuesday’s close, making it bigger than industry stalwarts like Goldman Sachs Group Inc. and Bank of America Corp.
“I’m not entirely sure what the business model is, but that hasn’t mattered to the Reddit crowd diving in like piranhas,” said Max Gokhman, chief investment officer at money manager AlphaTrAI Inc.
Like the retail-induced mania of early 2021, which catapulted stocks like GameStop and AMC Entertainment Holdings Inc. to unnerving highs before they crashed just as quickly, AMTD’s run as a financial giant is likely to last. little bit. Since hitting a record high on Tuesday, ATMD Digital has dropped 57%, wiping out about $175 billion in market value along the way. That’s more than the entire current market capitalization of companies like Morgan Stanley, Intel Corp. and Goldman Sachs.
Still, it’s hard to attribute the wild moves in stocks entirely to the retail crowd. While AMTD Digital appeared at the top of Fidelity’s list of the most traded stocks several times during the week, it lacks a few key features.
To begin with, AMTD Digital does not yet have options available to trade. Frantic buying of call options was a hallmark of the GameStop and AMC stock surges. Meanwhile, trading volumes have also been extremely low for most of the moves in the past week. Despite seeing swings of at least 40% in either direction on all but one day this week, the stock has yet to top 500,000 shares traded in a single day. On Friday, just over 50,000 shares changed hands, their sixth straight session of declining volume.
As for the retail traders themselves, even a cursory search of the top posts on Reddit’s WallStreetBets forum shows an avalanche of denials of any involvement.
AMTD Digital’s frenetic movements also caused extreme volatility in the shares of one of its parent companies, AMTD Idea Group. That firm, which is part of the larger AMTD Group umbrella, owns approximately 88.7% of AMTD Digital’s outstanding shares. It also saw a buying spree this week, surging as much as 520% on Tuesday alone.
On Friday, AMTD Digital announced that the underwriters of its mid-July IPO had decided to exercise their full greenshoe option. That means they will be able to buy an additional 2.4 million US deposit shares at their trading price of $7.80 each, about 99% below where they closed on Friday.
AMTD Global Markets Ltd. was the lead underwriter for AMTD Digital’s initial public offering, holding almost 90% of the shares, meaning it could benefit from its participation.
All of that put a spotlight on Calvin Choi, chairman, chief executive officer and largest shareholder of AMTD Group, who is currently facing an industry ban in Hong Kong for failing to disclose conflicts of interest when he worked at UBS Group AG.
Some companies are already cutting ties. Billionaire Li Ka-shing’s CK Group said on Thursday it would sell its remaining stake in parent company AMTD Group Co.
As shocking as AMTD Digital’s post-IPO surge has been, it is far from alone in such moves. On Friday, another Hong Kong-based financial firm, Magic Empire Global Ltd. made its US trading debut only to see its shares stall several times due to volatility as they rose as much as 5.799%.
Other Hong Kong and Chinese stocks have seen similar outsized gains after debuting in the US in recent weeks. At least five other companies, including Ostin Technology Group Co., Golden Sun Education Group Ltd. and Intelligent Living Application Group Inc. posted intraday profits of 395% or more on their first day of trading.
Michael Burry, the investor who predicted the 2008 housing crash, tweeted a screenshot of Magic Empire’s stock chart on Friday and said, “Gamblers play more the more they lose.”
(Updates with additional context on AMTD, prices everywhere)
Most Read Bloomberg Businessweek
©2022 Bloomberg LP