INSTANT SUPER-WEALTH ALL ROUND? An obscure Hong Kong company named AMTD Digital has seen a record-breaking rise. On Tuesday a scramble for its shares, newly listed in New York, saw its value rise to US$300 billion, which is more than Chinese giant corporation Alibaba’s New York valuation.
AMTD Digital has just 50 staff, so shared out, that would be US$6 billion each.
The share price then fell a bit the following, but the tiny company’s value, at US$200 billion plus, still stayed higher than that of Walt Disney empire, and was about twice as much as mega investment bank Morgan Stanley.
Pretty impressive? Er, yes. And spell “impressive” like this: s.u.s.p.i.c.i.o.u.s.
There’s been a scramble to find out a) what AMTD Digital does, and b) why investors are climbing over each other to buy shares at any price, sending the valuation rocketing into the stratosphere.
First, let’s look at question a) What does it do?
Not much, it seems. The corporate video is a splurge of standard business jargon (“one-stop digital solutions platform in Asia”). The unseen voice is set against a backdrop of sci-fi movie images of space ships docking. It appears to be a run-of-the-mill technology company, working in financial services.
Second, b) so if it so ordinary and boring, why are the shares rocketing?
Now that’s where it becomes intriguing. If there’s no logical reason for a small Hong Kong firm to become ultra-valuable, then there must be an irrational reason. The most popular theory is that this is an example of what is being called “a meme stock”. This is when people on the internet decide to dramatically move the price of a listed share by acting together and timing their purchases.
Evidence for this comes from the fact that AMTD has been much discussed on Reddit recently.
MR LI LOOKS UP
The story took on a bit of extra drama when someone discovered that one of Li Ka-shing’s companies was a part owner. But that died down when the firm’s spokesman said that it only has four per cent and is not actively involved.
And what does the company itself say? It’s not talking to journalists, but it did send out a statement (required by regulators when prices move erratically) saying that there had been no changes in its business operations.
But the thing about stories like this is that dramatic prices changes make every investor rich, including relatively small ones. A 14,000 per cent rise in the ocean lifts a lot of boats a long way up. So should you buy shares in it? Not unless you have nerves of steel and money to spare. It’ll be too late. When other meme stocks soared last year, it turned out to be rocky ride for people who didn’t get in at the bottom.
On a more serious note, the drama does suggest that there’s something worrying about the stock market, when a company’s valuation can become so detached from its actual value. You’re probably better off putting your money into something more trustworthy, such as the gambling tables in Macau.
Image at the top by Michael Heuser on Unsplash