Have you ever heard of AMTD Digital (NYSE:HKD)? Yeah, neither had anyone else. The three-year-old fintech company based in Hong Kong debuted on the NYSE in mid-July and has grown astronomically. But what is fueling this sudden surge that sent HKD into orbit? Perhaps we should begin with the question everyone on social media has been asking: what is AMTD Digital?
What is AMTD Digital?
AMTD Digital is a fintech startup in Hong Kong with 50 employees and about $25 million in revenues. It held its IPO on July 15th, where shares started trading for $7.80. If you think something doesn’t sit right about HKD’s performance, you’re probably onto something. The stock only has 185 million outstanding shares, which is relatively low, even for a small company. Low share volume typically leads to wild swings when there is an increase in buying or selling pressure.
Bloomberg reported that most shares were owned by the parent company, AMTD Idea Group Ltd. In fact, only about 8% of shares were meant to be publicly owned post–IPO. According to Yahoo! Finance, 0.0% of the shares are now held by insiders, which means we could see AMTD executives exiting with major profits. This coincides with the stock falling by more than 70% over the past couple of sessions.
The stock hit its peak at a staggering $2,250 per share, which gave it a market capitalization north of $300 billion. At one point, little AMTD Digital was worth more than Meta Platforms (NASDAQ:FB), Coca-Cola (NYSE:KO), JPMorgan (NYSE:JPM), and even Costco (NASDAQ:COST). Since then, the company’s value has slid to a more reasonable $100 billion, still wildly overvalued.
If you like to trade on fundamentals, you’ll likely scoff at the 4,000 price-to-sales multiple the stock was trading at. Even its current PE ratio of 850 seems ridiculous as the stock plummets back to Earth.
Is AMTD Digital the Next GameStop?
The answer is no, although for a few days, it reminded us of the meme stock hysteria from 2021. Like both AMC (NYSE:AMC) and GameStop (NYSE:GME), HKD was plastered across all social media platforms. From Twitter to Reddit to Stocktwits, $HKD was the trending ticker setting off alerts left, right, and center. But rather than rocket ship emojis and clever hashtags, a quick scan of r/WallStreetBets shows that even Apes were skeptical of the meteoric rise.
AMTD Digital was quickly labeled as a pump and dump, and not a MOASS (Mother Of All Short Squeezes). Of course, when a stock price rises so rapidly, there has to be buying pressure from somebody. So who was buying HKD at such astronomical prices? It’s a reminder that these sudden stock surges are generally followed by intense selling. There’s a reason they say stocks take the stairs up and the elevator down.
While little is known about AMTD Digital’s business, it’s safe to say the stock price did not represent its future potential. AMC and GameStop have legitimate businesses with global customers. At the peak of GameStop’s short squeeze, nearly 800 million shares traded in a single session. For AMTD, there were never more than 2.5 million shares traded once. It’s one reason why GameStop’s stock price on a pre-split basis has maintained its value, while AMTD is crashing.
Social Media Alerted Wall Street About AMTD Digital
Before the news for HKD was picked up by mainstream outlets, social media sentiment scanners were off the charts. Here’s a look at what scanners were picking up when it came to AMTD Digital:
As you can see, social media sentiment was overwhelmingly neutral or negative at the height of the hysteria. But the sheer volume of mentions across platforms like Twitter and Reddit raised the alarms. Here’s another measure of how quickly HKD spread across social media:
An 87% sequential rise in mentions from the previous day is nearly unheard of, let alone the 11,300% growth from last month when the stock held its IPO. So how are these metrics quantified for investors? Signing up for alerts with a social media scanner like Chatterquant will provide you with a notification on stocks like HKD the second that there is a surge in activity. Here’s a look at what Chatterquant users received at an early price of just $14.61:
As of August 4th, AMTD Digital has lost over 60% of its value in a matter of days. Daily trading volume has slowed to a trickle, with only 54,000 shares being traded at the time of this writing. Short squeeze or not, HKD (AMTD Digital) provided another example of the hysteria still surrounding meme stocks. Chatterquant users were alerted at just $14.61 before a move up to $2,250 per share. AMTD Digital is just another reminder of the power of social media sentiment and its effect on the stock market.