Skip to main content

AMTD Digital's 21,000% Surge Was Not a Meme Play This Time

While there are more questions than answers involving the performance of AMTD Digital's shares, there are no indications that it was a meme trade this time.
  • Hong Kong-based fintech AMTD Digital's stock went public on July 15 and shot up as much as 21,000% in a few weeks.
  • AMTD Digital does not appear to meet the same meme-stock criteria as GameStop and AMC Entertainment.
  • AMTD Digital's management has no clue what might be causing the volatility in its stock.
Figure 1: AMTD Digital's 21,000% Surge Was Not a Meme Play This Time

Figure 1: AMTD Digital's 21,000% Surge Was Not a Meme Play This Time

HKD Stock: Something's Not Adding Up

AMTD Digital  (HKD) , a subsidiary of AMTD Idea Group  (AMTD) - Get AMTD IDEA Group American Depositary Shares each representing one Class A Report, is a Hong-Kong digital investment bank that held its initial public offering (IPO) on July 15. It sold 16 million ADSs (American depositary shares) at around $7.80 each and raised $124.8 million.

The company offers digital banking and insurance technology platforms for consumers and small and medium-sized businesses. It also offers an ecosystem called SpiderNet, which is a platform for improving investor communication.

Roughly two weeks after its IPO, abnormal trading activity sent AMTD Digital's share price to over $2,000, an impressive 21,000% gain.

This pushed the company's market cap to over $310 billion at its peak — higher than the market caps of companies like Coca-Cola  (KO) - Get Coca-Cola Company (The) Report and Pfizer  (PFE) - Get Pfizer Inc. Report. In fact, AMTD Digital became one of the 30 largest companies by market cap.

Considering that AMTD Digital generated only $25 million in revenue in 2021 and has a minimal corporate history, it seems that something is not right.

The company said in a statement that there are no material events or circumstances related to its business that would justify the high volatility in AMTD Digital's stock. It also said that the company will continue to monitor any abnormalities in trading activity.

r/wallstreetbets Had Nothing to Do With It

Of course, upon seeing such abnormal trading activity, your first thought may be that HKD is a new meme stock. Since early 2021, retail investors have used Reddit forums like r/wallstreetbets to generate short squeezes and make the share prices of meme stocks like GameStop  (GME) - Get GameStop Corporation Report and AMC Entertainment  (AMC) - Get AMC Entertainment Holdings Inc. Class A Report soar.

But there's no evidence that retail investors are behind AMTD Digital's crazy stock performance.

Although there's been no sign of an organized short squeeze, HKD has seen elevated short volume, especially on July 28. Remember that short volume measures the number of shares that were shorted. That's different than the measure of short interest, which represents the number of shorted shares that still need to be closed or covered.

Figure 2: HKD's short volume.

Figure 2: HKD's short volume.

But even r/wallstreetbets users expressed through memes that they had no prior knowledge of AMTD Digital's stock performance.

The Bottom Line

There are still more questions than there are answers about what is going on with AMTD Digital. But all indications are that this is different from what happened with GameStop and AMC last year.

According to the U.S. Securities and Exchange Commission (SEC) report on GameStop's trading activity in January 2021, GME's surge was caused by a confluence of factors such as frequent Reddit mentions, significant coverage in the mainstream media, large volume changes, and elevated short interest.

Considering that HKD's elevated trading volume didn't stem from social media activity, it hasn't joined the ranks of the meme stocks at this time.

(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting Wall Street Memes)