This is not investment advice. The author has no position in any of the stocks mentioned. Wccftech.com has a disclosure and ethics policy.
AMTD Digital (NYSE:HKD), a relatively obscure Hong Kong-based fintech company, is up around 1,500 percent over the past 5 trading days, winning widespread attention from the mainstream media in the process.
As an illustration of the ferocity of this rally, consider the fact that AMTD Digital shares were trading at $71 on the 28th of July 2022. Currently, these shares are trading at $1,499!
So, what has spurred this extraordinary rally in an otherwise morose investment climate? Well, the company, which is a subsidiary of the investment holding company AMTD Idea Group, went public in mid-July by issuing American Depository Receipt (ADR) shares on the New York Stock Exchange and raising $125 million in the process. AMTD Digital’s most prominent product offering relates to its metaverse platform, called AMTD SpiderNet, which connects the company with “clients, shareholders, business partners, and investee companies to build an ever-extending, inter-connected network that creates value for all stakeholders….” Apparently, it is an asset management and investment banking service provider with a metaverse-imbued flavor.
While there is no fundamental basis for this rally, the stock has garnered tremendous attention from Reddit-based retail traders’ groups, including the famed WallStreetBets forum. Consider the fact that the stock currently has a twelve-month trailing P/E ratio of 1,917.81! This means that, right now, investors are paying nearly 2,000x as much as the stock’s earnings over the past 12-month period.
Apparently, this rally is being driven by the retail crowd. The one noticeable aspect of this surge is the drastic reduction in the stock’s volume as it shot upward. Note the downward trend in AMTD Digital’s volume in the chart below.
This brings us to the crux of the matter. Citron Research has now opined that it does not believe that AMTD Digital is a meme stock.
$HKD is NOT a meme stock. While sure price is stupid, it only traded 339k shares yesterday. Has not captured the imagination of retail traders like $GME. Obviously, there is no borrow and if so has an egregious borrow fee. SEC does not regulate market caps. Have no position
— Citron Research (@CitronResearch) August 3, 2022
Given the “egregious borrow fee” of the stock, it is not unreasonable to speculate that AMTD Digital shares are in a short squeeze currently. If so, we pity the party that had shorted this stock, to begin with.
Do you think the surge in AMTD Digital shares signifies a return of the meme stock mania? Let us know your thoughts in the comments section below.