Chinese meme stocks AMTD Digital (NYSE:HKD), Magic Empire Global (NASDAQ:MEGL) and AMTD IDEA Group (NASDAQ:AMTD) all charged upward on Sept. 14, with HKD stock scoring a 300% gain. HKD rose another 25% overnight.
AMTD Digital had 11 trading halts on the day, caused by an imbalance between buy and sell orders.
All three stocks had their initial public offerings (IPOs) over the summer, all rose spectacularly on their first day of trading, and all promptly fell hard. The latest rise in AMTD Digital added about $27 billion to its market capitalization. At one point right after its IPO, AMTD Digital traded at $1,679 and was worth more than Goldman Sachs (NYSE:GS).
No News?
None of the stocks had any news to justify the gains, creating something of a market mystery.
AMTD Digital claims to have a “metaverse” unit called Spidernet and had initial funding from Hong Kong’s CK Hutchison conglomerate, which later disavowed the company.
One thing all three companies seem to have in common is the runner of their U.S. order book, Network 1 Financial Securities. The company’s website has a page devoted to Chinese investment.
A unit of AMTD was hit on Sept. 9 by a breach of contract suit from a Chinese bank, concerning a 2015 investment management contract. The suit said AMTD Global put $264 million into a company called Everglory Group when the investment contract limited individual investments to $50 million. AMTD chairman Calvin Choi had been on the bank’s board until a week before the suit was filed. AMTD disputes the charge. The company is also facing scrutiny from Hong Kong’s securities regulator.
HKD Stock: What Happens Now?
AMTD Digital seems to be at the heart of the story. Its moves were enormous, and its operations are surrounded by controversy. The swings in MEGL and AMTD IDEA Group are smaller.
When the dust settles and the story of AMTD Digital chairman Calvin Choi is told, the investment story is certain to be over. Whatever the explanation, it will make fine reading, but you’ll want to be out of the stock well before then.
On the date of publication, Dana Blankenhorn held no positions 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.
