AMTD Digital Plunges Nearly 40%—Stay Away From This ‘Absolute Scam,’ Expert Warns

Topline

Shares of Hong Kong fintech firm AMTD Digital continued to plunge on Thursday, crashing for a second day in a row after rising more than 21,000% since its July IPO, with experts calling it a new meme stock and warning investors to stay away from the stock as its valuation looks like “an absolute scam.”

Experts say it’s only a matter of time before regulators are involved as AMTD Digital trades at … [+] “ludicrous” valuations.

Michael Nagle/Bloomberg

Key Facts

AMTD Digital’s stock fell nearly 40% on Thursday, down to $700 per share, after a 35% decline a day earlier.

Up until Wednesday, the stock had been skyrocketing since its mid-July IPO for no apparent reason (even the company appeared baffled by the wild swings) drawing comparisons to the meme stock trading frenzy that occurred in early 2021.

Before the recent declines, the stock had surged as high as $2,555 per share (up from an IPO price of just $7.80), at one point giving the company a valuation of more than $300 billion and making it one of the largest in the United States by market capitalization.

Despite the stock’s recent struggles, AMTD Digital still has a market capitalization of nearly $120 billion, giving the company a higher valuation than big names like IBM, American Express, Goldman Sachs and Lockheed Martin.

“AMTD feels very ‘memesque,’” says Jim Osman, CEO of research firm The Edge Consulting Group, who adds that “on a valuation basis, it’s ludicrous, but as we’ve seen in the last two years, valuations on meme stocks count for nothing.”

Crucial Quote:

AMTD’s sky-high valuation, especially for a company with little revenue (just $25 million in 2021), looks like “an absolute scam,” says Osman. “The business isn’t a great business and we would advise investors to stay away,” he adds.

What To Watch For:

Some experts, including famed short seller Jim Chanos, have questioned why there has not yet been any kind of regulatory crackdown given AMTD’s large price swings in recent weeks. Similar to the wild trading in meme stocks last year, “this latest fad will likely see a quick regulatory gauntlet thrown its way,” predicts Edward Moya, senior market analyst at Oanda.

Big Number: Nearly $37 Billion

That’s how much Hong Kong banker Calvin Choi, who controls AMTD Digital through a web of companies, is now worth on paper, according to Forbes’ calculations.

Key Background:

AMTD Digital generates revenue from fees and commissions in its digital financial services business, as well as through its digital “metaverse” platform called SpiderNet. Launched in February, there are few details about the project on the company’s website or in filings. Trading under the ticker HKD, AMTD Digital is a subsidiary of AMTD Idea Group (ticker: AMTD), a Chinese investment holding company which owns a more than 95% stake. AMTD Idea’s stock was also down more than 30% on Thursday but has risen more than 150% in the last five days. The company is valued at just $1.5 billion, more than $100 billion smaller than its subsidiary.