On August 4, when the US stock market opened, AMTD Digital announced the suspension of trading, but the stock resumed trading a few minutes later. As of 21:50 on August 4, Beijing time, the stock price fell to 19.32%.
The day before, AMTD Digital had an intraday drop of 41%, and closed down 34.48%, erasing its market value by US$100 billion overnight.
How did this “demon stock” form? How long can this stock price speculation feast last?
Soaring 200 times in half a month
AMTD Digital has risen by more than 214 times in only 13 trading days after its listing, and its market value once surpassed that of Alibaba, and then fell by 41.04%.
Specifically, on July 15, AMTD Digital landed on the US stock market with an issue price of US$7.8. The stock price rose by 107% on the day of listing, and rose by more than 71% on the second trading day, and then fell for three consecutive trading days. , the declines were 10.5%, 16.8% and 1.84%.
Since then, AMTD Digital’s share price has been rising all the way. The seven trading days from July 22 to August 2 have increased by 234.65%, 28.42%, 36.19%, 134.71%, 122.36%, 85.38% and 126.28% respectively.
On August 3, AMTD Digital finally stopped its skyrocketing growth. The intraday drop once reached 41%, and the closing price dropped 34.48%, erasing US$100 billion in market value overnight.
In response to the more than 200-fold increase in the stock price, AMTD Digital issued a public statement on August 2, saying that the company noticed significant fluctuations in the stock price after the IPO and observed some very active trading volumes. Since the IPO date, there have been no material circumstances, events or other matters related to the company’s business and operating activities. The company also closely monitors the market for any unusual trading activity or anomalies.
According to the prospectus, AMTD Digital was established in 2019 and registered in the Cayman Islands. It is a digital financial company under AMTD Group, and its English name is AMTD Digital. Its business specifically involves multiple vertical fields, including digital financial licenses and services, digital media, content and marketing, “SpiderNet” ecosystem solutions and digital economy investment.
Among them, AMTD Digital’s two main business lines are spider web ecosystem solutions and digital financial services.
As the largest tome business, the spider web ecosystem solutions business contributed 80% of the total revenue in fiscal 2021, which was HK$157 million.
However, it can be seen that the growth rate of AMTD Digital’s business has slowed down significantly. According to the financial report data, the profit of the spider web ecosystem solution business in the first ten months of fiscal 2022 fell by 2.5% year-on-year; the revenue and profit of the digital financial service business fell even more, with revenue down 2.74% and profit down 18%.
According to the prospectus, AMTD IDEA Group is the majority shareholder of AMTD Digital, with a shareholding ratio of 88.7%. AMTD Group, established in 2003, is involved in financial services, digital technology, art, culture and entertainment. One of its founding shareholders is Li Ka-shing’s Cheung Kong Holdings and Hutchison Whampoa. At the beginning of this year, AMTD International acquired control of AMTD Digital from AMTD Group for US$1.2 billion. AMTD Group currently holds 86.7% of AMTD International.
On August 4, Li Ka-shing’s subsidiary Cheung Kong Holdings issued a press release on its official website to disclaim its relationship with AMTD Digital, stating that “the companies under the Cheung Kong Group do not directly hold shares in AMTD Digital, nor do they have any business dealings with the company.”
Changjiang Group stated that it had sold most of its interests in AMTD Group nearly 10 years ago, and now there is only a very small amount of less than 4% of the interests that were not sold together at that time. It is currently negotiating the sale of its less than 4% stake in AMTD Group. AMTD Group is the parent company of AMTD Digital.
Changjiang Group emphasized that there is no representative of Changjiang Group on the board of directors of AMTD Group. The CK Group is also not involved in the operation of AMTD Group and has no knowledge of any business and plans of the Group.
The soaring share price of AMTD Digital has made investors speculate about the reasons behind the trend of this stock. One explanation is that the company has only a fraction of its shares available for trading. AMTD Digital has a total share capital of about 74.02 million shares, but only about 8.37 million shares in circulation, accounting for 11.3%.
“This stock is overvalued,” Valuable Capital Ltd. “Lower shares outstanding in a company’s stock means that it will be easier for major shareholders to push the share price higher,” said Thomas Nip, a research analyst at the company.
Kuang Yuqing, the founder of Lens Company Research, a third-party research and consulting agency, told The Paper: “The value of AMTD Digital is definitely not enough to support its current market value. Because it has just been listed, the market’s tradable shares are very small. It cannot be ruled out that there will be institutions that hold it, or original shareholders, to operate with small leveraged funds to raise the market value to the current level. When there is an avalanche, it will fall very badly.”
Yan Zhaojun, a strategist at Zhongtai International, holds a similar view. He analyzed the surging news reporter: “AMTD Digital listed 16 million ADSs in its initial public offering, raising about US$125 million at US$7.8 per share, and the estimated IPO valuation was only US$1.4 billion. The publicly traded shares after the company was listed. About 8.9%, parent company AMTD International holds 88.7%, and other shareholders hold 2.7%. The average daily turnover in the first five days of listing was only about 840,000 shares. Although the stock price has surged hundreds of times in recent days, the average turnover in five days The stock is only 960,000 shares, and the liquidity is extremely low, showing that most of the stocks are concentrated in the hands of a small number of investors. The stock prices of these extremely concentrated stocks are highly volatile and have no reference to fundamental factors. In other words, as long as these shareholders collectively If you hold on tight and don’t sell, the stock price can theoretically continue to rise.”
Mak Yuen Teen, an associate professor of accounting at the National University of Singapore, said AMTD Digital is a “classic candidate for stock manipulation” because a large amount of AMTD’s shares are held by its parent company and cannot be freely traded.
Although the recent rebound in U.S. stocks is reminiscent of last year’s push for GameStop Corp. There has been a frenzy of retail trading among other companies, but some Reddit and Twitter users appeared baffled by the rally, blaming the claim that Reddit-owned WallStreetBets was behind the rally.
However, AMTD Digital is indeed the second most popular ticker in Wall Street betting over the past 24 hours, according to Quiver Quantitative, an alternative data provider that tracks Reddit group activity.
The Futu investment research team believes that there is no historical bargaining chip for overseas IPOs, and the process of attention from low to high is likely to cause a concentrated catalyst of market sentiment. At present, there is no hot spot for making money in the market, and short-term speculation funds are concentrated on AMTD Digital. Investors should give priority to risk factors.
Yan Zhaojun also emphasized that investors are not recommended to participate at all, and the risk is extremely high at this stage, and there is a risk of a 90% drop at any time.