Meme stock mania is far from over, and the latest example is AMTD Digital (NYSE:HKD). Its ADS (American Depositary Shares) has skyrocketed about 14,000% from an IPO (Initial Public Offering) price of $7.80 on July 15. This includes yesterday’s 34.5% decline.
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AMTD Digital is a subsidiary of AMTD IDEA Group (NYSE:AMTD). It offers digital solutions platforms across multiple verticals, including financial services, SpiderNet ecosystem solutions, content & marketing, media, and investments.
The surge in its stock price drove its market cap higher than many valuable U.S. corporations. However, investors should take caution as this surge in price is not backed by any fundamental change in the company’s business. It’s worth mentioning that HKD delivered revenues of $25.2 million in FY21 (period ended April 30, 2021). Moreover, for the 10 months ended February 28, HKD had revenues of $21.5 million.
In a thank you note to investors, AMTD Digital stated that it had observed strong trading volume in its ADS since the IPO. It highlighted that there were no events, material circumstances, or other activities relating to the company’s business since the IPO.
In response to the surge in HKD’s price, Hindenburg Research’s founder Nate Anderson tweeted that HKD and AMTD shares are “spiking in what is surely a mega squeeze.” He added, “We have no position in either and have just been watching the madness from the sidelines. However, we find it deeply troubling that serial facilitators of fraud can disrupt our markets completely unabated.”
In another tweet, Anderson stated, “The company is ~88.7% owned by AMTD, a sketchy Hong Kong-based underwriter.” He further highlighted that every IPO underwritten by AMTD has collapsed in the past.
Key Takeaway
HKD stock seems to be part of the meme stock retail craze phenomenon. Since HKD stock went viral in July, investors who bought it and are still holding onto it must have amassed crazy wealth. However, HKD stock is prone to manipulation given its low float. Given the surge in its price without any significant fundamental backing, it would be prudent to stay away from HKD as it could remain highly volatile.
HKD has a Neutral Smart Score of 7 out of 10, implying it could perform in line with market averages.
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