Addentax Group (NASDAQ:ATXG) stock rose 2,000% on its Nasdaq debut after briefly touching a gain of 13,000%. As trading proceeded Aug. 31, ATXG stock was subject to more than 20 halts to settle imbalances.
The move came after the small Chinese company uplisted to the Nasdaq with a $25 million initial public offering, or IPO.
Addentax began as a textile maker in 2000. Its website now says it provides “comprehensive chain management in the textile and apparel industry.”
What’s Addentax?
This is the third explosive Chinese IPO of the summer, following AMTD Digital (NYSE:HKD) and Magic Empire Global (NASDAQ:MEGL). Both had explosive run-ups at their launch but are now trading at a fraction of the highs.
As with those stocks, the ATGX order book was run by Network 1 Financial Securities in Red Bank, New Jersey. Five million shares were initially offered, but the underwriter was given an option on 750,000 more to cover over-allotments.
The fall of the earlier IPOs, however, is not complete. On Sept. 1, AMTD was worth $22 billion on estimated 2021 revenue of $201 million. MEGL was worth $155 million on 2021 revenue of $17 million. Neither company is profitable.
ATXG stock may already be starting that adjustment. The shares fell sharply in pre-market trading today and have continued to drop since. The market cap at the end of Aug. 31 trading was $17.5 billion. The company had under $13 million in revenue for the year ending in March.
The Addentax website says it is associated with the Yingxi Group, based in Shenzhen, Guangdong with an office in New Jersey. Yingxi began trading here in 2016 after a series of reverse mergers and acquisitions. It signed an industrial park agreement with the government of Xinxiang in northern Henan province in 2020. The site names six subsidiaries, but links to all of them are listed as forbidden.
What Happens Next?
The Sept. 1 action in the stock looks to be short. Those traders who were able to sell short near the Aug. 31 high should profit. Where it settles is anyone’s guess. Based on the HKD and MEGL examples, that’s likely to be 90% down from the highs, but well above fundamentals.
On the date of publication, Dana Blankenhorn held no positions (directly or indirectly) in any companies mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
