AMTD Digital May Be The New ‘Perfect Meme Stock,’ Loses $100 Billion In Value In One Day After Rising Over 125%

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Topline

Shares of under-the-radar Hong Kong fintech company AMTD Digital continued to swing wildly in volatile trading on Wednesday after a more than 21,000% run up since its IPO last month, and although it’s still unclear what’s sparking the wild price action, many are likening it to the meme-stock frenzy of early 2021.

The Hong-Kong based fintech firm has “brought meme stock mania back and put it on steroids,” … [+] analysts say.

Richard Drew/Associated Press

Key Facts

Shares of AMTD Digital have skyrocketed rising more than 1,500% over the last five trading days and up 125% on Tuesday alone as trading was halted several times for volatility, though the stock fell back to earth on Wednesday, declining 35%.

As of Tuesday’s close, the stock had surged 21,400% to more than $1,600 per share, up from an IPO price of $7.80 on July 15, when it raised $125 million in what was the largest listing by a Chinese company on the New York Stock Exchange this year.

AMTD Digital, which trades under the ticker HKD, is a fully owned subsidiary of AMTD Idea Group (ticker: AMTD), a Chinese investment holding company which 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 “to our knowledge, there are no material circumstances, events nor other matters relating to our Company’s business and operating activities” that explain the run-up of the stock price.

Comparisons are being drawn to meme stocks that gain a cult-like following of investors who collectively influence the price of shares, but it’s unclear if that’s the case here: “It’s a combination of a few things—a small float, some likely short interest and now the meme stock angle,” explains Brendan Ahern, chief investment officer at China-focused ETF provider KraneShares.

A quick glance at popular forums such as Wall Street Bets show that up until a few days ago, the stock was relatively unheard-of for many retail investors, many of which issued warnings to others about AMTD Digital’s low revenue and sky-high valuation.

Crucial Quote

AMTD is “in some ways the perfect meme stock,” says Ahern. After its IPO, AMTD Digital had a very small float (shares publicly available relative to the total number issued), since AMTD Idea owns over 95% of the company. What’s more, there was likely a short squeeze, which is being followed by retail investors who are starting to catch on, Ahern adds.

Surprising Fact

Before Wednesday’s decline, AMTD Digital’s market capitalization had soared to over $300 billion, making it one of the most valuable companies in the U.S. ahead of big names such as Bank of America, Disney and Coca-Cola. After paring back recent gains on Wednesday, however, the company is now valued at roughly $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 $400B meme stock in the room?” famed short-seller Jim Chanos said on Twitter. “We literally had congressional hearings” over the $30B run-ups in GameStop and AMC, “but just [crickets] today.”

Key Background

AMTD Digital recorded just $25 million in revenue for 2021, according to regulatory filings, with most of that coming in the form of fees and commissions from its digital financial services business. AMTD launched its digital “metaverse” platform, called SpiderNet, in February, though there are few details about the project listed on the company’s website or in filings. AMTD Digital and its parent company have also been trading at relatively low volumes, which is unusual given their wild price fluctuations. On Wednesday, AMTD Idea and AMTD Digital both saw volumes of around 80,000, compared with an average of 5.4 million and 1.1 million, respectively.

What To Watch For

“A Hong Kong-based fintech company just brought meme stock mania back and put it on steroids,” says Edward Moya, senior market analyst at Oanda. “This latest fad will likely see a quick regulatory gauntlet thrown its way.”

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