Bubble stock spike harks back to Hong Kong habits

AMTD Digital

05/08/2022 03:51

(The author is a Reuters Breakingviews columnist.  The opinions
expressed are her own.)
    By Jennifer Hughes
    HONG KONG, Aug 5 (Reuters Breakingviews) - Some successes
are too much to bear. The 21,000% three-week surge in newly
listed AMTD Digital’s  HKD.N  New York shares has its bosses
warning they know of no reason for it, while the companies of
Hong Kong “superman” investor Li Ka-shing, a former backer, on
Thursday publicly distanced themselves. U.S. investors are used
to logic-defying stock bubbles, but this one has traits redolent
of its Asian home.
    AMTD Digital has all the ambition that inflated
growth-focused technology stocks in recent years, promising in
its prospectus to act as a “fusion reactor” for a wider
ecosystem. Yet it’s not the potential to supercharge 10-month
net profit of HK$187 million ($24 million) so much as its
inexplicable surge that has produced comparisons with
pandemic-era so-called meme stocks  urn:newsml:reuters.com:*:nL4N2ZF373 like GameStop
 GME.N  or AMC Entertainment  AMC.N . 
    Look at markets in its Hong Kong home however, and AMTD’s
rally resembles bubbles in a series of small-cap stocks in the
Asian hub in the middle of the last decade. Many of them
collapsed soon after financial links between 50 or so were
revealed by local independent analyst David Webb. The key common
factor then and now is a small free-float: Just 11% of AMTD’s
shares are outside the control of its majority owner, AMTD Idea,
an investment bank and asset manager itself part of a broader
tangle of AMTD-related companies controlled by Calvin Choi. 
    It doesn’t help AMTD Digital’s standalone investment case
that Choi, also its chairman, is currently fighting a two-year
ban by Hong Kong’s regulator for failing to disclose conflicts
of interest when he worked for UBS  UBSG.S . AMTD Digital’s own
financials could be clearer too. An asset sale reported in its
most recent accounts https://www.sec.gov/Archives/edgar/data/0001809691/000119312522194790/d943653d424b4.htm
 added two-thirds to its net profit for the 10 months to the end
of February; while not named, it fits the description of its
stake in online recipe producer DayDayCook, whose blank-cheque
deal fell apart three days before AMTD Digital’s Big Board
debut. The company did not respond to Breakingviews’ inquiries. 
    Before AMTD’s headline-grabbing rise, Choi had recently
touted an AMTD-linked hotel in Singapore, launched a digital
music venture with his own song https://www.linkedin.com/posts/calvin-choi-854b8279_%E7%8D%85%E5%AD%90%E5%B1%B1%E4%B8%8B2022-%E7%89%87%E5%B0%BE%E6%9B%B2-%E5%82%B3%E6%89%BF%E7%9A%84%E6%AD%8C-activity-6924132017102102528-J26i/?utm_source=linkedin_share&utm_medium=member_desktop_web
 and bought French fashion media brand L’Officiel. He saw them
all as adding value to the broader group. Shareholders caught up
late in AMTD Digital’s surprise success may fail to see the
benefit. 
    Follow @JennHughes13 https://twitter.com/JennHughes13 on
Twitter
    
    CONTEXT NEWS
    Shares in AMTD Digital closed in New York on Aug. 2 at
$1,679 apiece, more than 21,000% above their issue price three
weeks previously. On Aug. 4 they had fallen to $800 each,
representing a 10,156% gain.
    The Hong Kong-based company is majority-owned by AMTD Idea,
an investment bank and asset manager. AMTD Digital is involved
in digital financial services, with revenue for the 10 months to
the end of February reaching HK$157.4 million ($20 million).
    The company sold shares at $7.80 each in its initial public
offering on July 15, raising $125 million.


 (Editing by Antony Currie and Katrina Hamlin)
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