What is AMTD Digital in the world, and who is behind it?
That is the question many investors are asking themselves after a little-known company from Hong Kong was able to join the ranks of global giants worth nearly half a trillion dollars on Tuesday.
It started when the American Depository Stock (ADS) with ticker symbol HKD opened, jumping 25% from its previous closing price just as it started trading before hitting an intraday high of $2,555.
At its peak, it more than tripled in value and reached a market capitalization of more than $450 billion, more than either Facebook’s parent company Meta or Chinese online retailer Alibaba.
It did so on a daily volume of just 350,500 shares, according to data from Yahoo Finance, the lowest level since ADS began trading and well under 1.2 million traded on average.
Even if it now gave up a quarter of its value on Wednesday, it would still be worth about $240 billion, making it more valuable than Toyota, Nike, McDonald’s or Walt Disney.
Needless to say, this was an impressive performance for a company that sold 16 million shares at $7.80 each in mid-July, giving it a market capitalization of about $1 billion.
What is behind the surge?
There seems to be absolutely no justification for this kind of market value.
Total income-producing assets on its balance sheet barely exceeded $400 million as of March according to filings by SEC, a small town in the world of high finance. luck He sought to contact the company, but emails and calls were not immediately answered.
A look at her website reveals a bit of her business model. The company’s one-minute brief presentation video markets the company as “Asia’s “end-to-end digital solutions platform and fusion reactor for the best entrepreneurs and ideas in the digital age” using star Wars– Like the aesthetic.
A deeper look at the prospectus filed with the Securities and Exchange Commission reveals what that means.
AMTD Digital primarily sells a type of club membership to “SpiderNet Ecosystems Solutions,” which it claims brings benefits by connecting businesses with one another. This makes up the bulk of its $25 million in annual revenue generated in the fiscal year ending in April 2021.
Unusually, its pre-tax earnings over the past three years have been consistently above its net worth thanks to fair value accounting gains over its economic interests in companies such as Appier, DayDayCook, WeDoctor and five Asian fintech companies.
The parent company is AMTD Group, a Hong Kong conglomerate that lists investment banking, hotel services, premium education, and media and entertainment as core competencies. It also has another subsidiary, AMTD IDEA, which is listed on the New York Stock Exchange as well, although it is only worth $14 billion.
The exact reason for US-listed AMTD Digital is unclear, as it immediately warned investors in its stock sale prospectus that it may eventually have to be delisted under SEC rules.
That’s because Beijing’s red tape currently prevents a Chinese auditor from being inspected by the US Public Company Accounting Oversight Board created under the Sarbanes-Oxley Act.
This has been a constant source of frustration for investors in many Chinese stocks. If the US and China fail to reach a deal, approximately 261 US-listed Chinese companies with a combined market value of $1.3 trillion face delisting.
AMTD Group Chairman and CEO, Calvin Choi, has left his job as General Manager at UBS to take charge.
His capitalist history and distinction as a young global leader at the World Economic Forum do not prevent him from extolling the strengths of the Communist Party of China, or celebrating the “glory and dream of the great renewal of the Chinese nation” a century later. incorporation.
Despite bragging about an executive vice president with a record of handling corruption and links with Carrie Lam – the former Beijing governor in Hong Kong – Choi himself is, however, targeted for a two-year ban on the industry by the city’s securities regulator after investor China Minsheng Group accused Investment Choi wrongdoing.
“Some projects [undertaken with funds from CMIG] “He has already made profits, but he has not given us the profits,” a senior executive from the company said to China. Caixin Back in October 2020. “Some have experienced losses, but we don’t know if he actually invested the money or embezzled it.”
In the world of fundamental analysis, where companies are valued based on their future cash flows, AMTD Digital’s staggering market capitalization is the kind of seismic anomaly in the financial system that should statistically only come about once every hundred years.
Even AMTD Digital seems puzzled as to why it is so valuable now. Using a thank-you letter to the new shareholders as an opportunity, she claimed she was also baffled by the performance of her stock.
“During the period since our initial public offering, the company has noticed significant volatility in the price of our ADS and has also noted some very active trading volume,” she wrote on Tuesday. “To the best of our knowledge, there have been no material circumstances, events or other matters relating to our company’s business and operating activities since the date of the IPO.”
With this kind of leap, it’s no surprise that permapers came out of their slumber. Short seller Jim Chanos wondered if “we’re all going to ignore the 400 billion meme stock in the room” while Nate Anderson of Hindenburg Research its controlling owner AMTD Group called it “superficial.”
It coincidentally came on the same day that Securities and Exchange Commission Chairman Gary Gensler hailed the 20th anniversary of the Sarbanes-Oxley Act aimed at restoring confidence in US capital markets after the accounting fraud scandals that roiled investors in Enron and WorldCom.
The run-up has evoked painful memories of Robinhood’s fateful decision to scrap the ability of retail investors to place orders on the GameStop retail chain, which is seen as a decision to protect a handful of underwater hedge funds in the same stock.
“So why wasn’t the buy button for HKD removed? Because retail wasn’t behind it?” one Twitter user responded to Gensler on Tuesday. “The real fraudulent stock market. You are useless.”
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