Shares of Hong Kong wealth management firm Prestige Wealth (NASDAQ:PWM) are surging higher more than 100% today following its initial public offering (IPO) yesterday. During the IPO, 1 million shares were offered to the public at an initial price of $5 per share. These shares were priced at the low end of the range between $5 and $6.
The popularity of PWM stock has also given a boost to other Hong Kong-based stocks, such as TOP Financial Group (NASDAQ:TOP), AMTD Digital (NYSE:HKD) and Magic Empire Global (NASDAQ:MEGL). It has also raised concerns around market manipulation previously seen during the IPOs of some of the aforementioned stocks.
Since its IPO, PWM stock is up by over 100%, which may be partially attributed to its low float of just 3.16 million shares. The stock prices of companies with low floats are easier to move compared to the prices of companies with high floats.
PWM Stock: Prestige Wealth Surges Following IPO
Prestige expects to receive aggregate gross proceeds of $5 million from its IPO. These proceeds will be used toward “brand promotion, hiring of additional client relationship managers and employees, expansion of products and services, and general working capital.” The company has also provided its underwriters a 45-day option to acquire an additional 150,000 shares at the IPO price following the close of the offering.
So, what exactly does this company do? As its name suggests, Prestige provides wealth and asset management services to clients in Hong Kong, according to its prospectus summary. For the fiscal year ended Sept. 30, 2022, the company reported revenue of $2.09 million, down by 25.32% year-over-year (YOY). Wealth management accounted for 84.44% of revenues while asset management accounted for the remaining 15.56%. Additionally, concentration risk seems to be high with the company. Prestige stated:
“Approximately 99.93% of revenues from wealth management services for the fiscal year ended September 30, 2022, or approximately $1.76 million, was generated from a client in the U.S.”
Also concerning is a dilution warning from the company. Prestige cautioned that its pro forma net tangible book value per share is lower than its mid-point IPO price of $5.50. As a result, “when you purchase our Ordinary Shares in the offering and upon completion of the offering, you will incur immediate dilution of $4.63 per Ordinary Share.”
On the date of publication, Eddie Pan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
