For the most part, financial giants are giants because they’ve been there forever. But every once in a while, a company breaks through that shatters the mold.
As of Wednesday’s close, a Hong Kong-based software company called AMTD Digital was worth more than US$203 billion, a pretty giant leap ahead considering it only brought in US$25 million in revenue for the last financial year. Its stock price is up 14,000% from its IPO price of US$7.80, and its IPO was just last month. To put it more simply, it got really big, really fast.
In fact, the company is so big now that it’s worth more than Wells Fargo, Morgan Stanley and Goldman Sachs. And the weird part is that no one seems to know precisely why it’s booming in the way it is. Some have pointed to its relatively low amount of shares available for sale, and others have pointed to recent pump-and-dump schemes that have played out through Reddit and Twitter – although many confused Redditors insist that sub-reddit WallStreetBets had nothing to do with the situation.
But ultimately, the question is whether or not it’s worth that much or if the valuation exists only on paper. The unpredictable trading continued on Wednesday, with the stock rising as much as 26% before closing down 34%.
“The stock is highly overvalued,” said Thomas Nip, an analyst at Hong Kong-based Valuable Capital. “The low free float in the company’s shares means it will be easier for big shareholders to push up the stock price.”
“Given the speed of its ascent, I have a feeling this one will nosedive,” said Oktay Kavrak, director at Leverage Shares. “I hope investors take profits along the way as the inevitable crash will send HKD back to relative obscurity.”
“[AMTD Digital] is clearly the newest meme stock with bands of retail traders purchasing the stock at the same time, pushing the price sharply higher,” said Victoria Scholar, head of investment at Interactive Investor.