The world has a new meme stock behind it is an ex-UBS banker
A small financial company from Hong Kong has risen to become one of the most valuable stock exchange companies in just a few days. The circumstances are most strange.
Published: 08/05/2022, 20:27
Calvin Choi (with gavel) in August 2019 at the New York IPO of AMTD Idea, which owns 88.7 percent of AMTD Digital.
Photo: AFP
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 at $2,555 last Tuesdaybut the stock ended the day well below $2,000. The price rose more than 320 times. The market value reached up to 400 billion dollars (equivalent to 380 billion francs). The company, which until recently hardly anyone knew, 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 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 possible above all in the case of narrow stocks, i.e. companies of which there are not many shares on the market.
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.
In the business elite: Calvin Choi (left) at the WEF 2017 with his ex-boss at UBS, Sergio Ermotti (centre).
Photo: amtdigital.net
Some things that became known about AMTD Digital itself are also strange. The ownership structure is confused. Ultimately, it leads to Calvin Choi, employed at UBS between 2010 and 2016, born in Hong Kong and with Canadian citizenship. He is accused in Hong Kong of violating the obligation to disclose conflicts of interest during his five years at UBS. Choi defends himself against the allegations. 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.
There are many inconsistencies for such a valuable company. It’s no wonder that analysts who can’t explain the price explosion are skeptical. Oktay Kavrak of trading firm Leverage Shares said: “Looking at the rate of increase, I have a feeling it’s going to nosedive.”
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