AMTD Digital (HKD) stock skyrockets over 100%, no idea why

Update: AMTD Digital stock (HKD) soared a whopping 126.28% in Tuesday’s trading, reaching a lifetime high of $1,679. The stock price has gained as much as 32,229% since its mid-July initial public offering (IPO) and the company doesn’t have any idea why the share price has soared. Industry experts justify that the AMTD stock surge is being driven by the low-float nature of its outstanding shares and overwhelming demand for the stock, per Market Insider. AMTD Digital is a Hong Kong based investment banking company that has created a digital platform called “AMTD SpiderNet”. The stock price of AMTD Digital stock (HKD) defied a cautious tone on major Wall Street indices, as US House Speaker Nancy Pelosi landed in Taiwan, despite several threats from China.

Is this a joke? If it is not, it is plenty more evidence that we are living in one of Elon Musk's simulations. 

When AMTD Digital (HKD) went public on July 15, just two weeks back, the Hong Kong-based investment bank sold 16 million American depositary shares for $7.80 each. Lo and behold, after four separate sessions of enormous gains between 85% and 235%, HKD stock closed out its 12th trading session on August 1 at $742. This amounts to a little over a 9,400% gain in just a fortnight.

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On top of that HKD is not stopping. Shares are up another 24% on Tuesday's premarket at $919.69. This amounts to just under 11,700%. Something does not smell right.

AMTD Digital itself did not think so either. On Tuesday morning, during the Asian session, the company issued a statement acknowledging the strange trading activity.

"During the period since our initial public offering, the Company noted significant volatility in our ADS price and, also observed some very active trading volume," reads the statement. "To our knowledge, there are no material circumstances, events nor other matters relating to our Company’s business and operating activities since the IPO date."

The statement added that AMTD Digital executives will continue to monitor the market for "unusual trading activities or abnormalities".

Who is AMTD Digital?

AMTD Digital is a subsidiary of parent company AMTD IDEA Group. AMTD Digital runs an independent investment bank out of Hong Kong as well as an asset management platform. The firm also specializes in brokering insurance products to corporate clients and advising on strategic private equity investments. Primarily, the firm appears to connect Hong Kong and mainland Chinese corporations with international equity and debt markets like most investment banks.

With the run-up in AMTD Digital's share price, the firm is now worth roughly $137 billion based on the most recent closing price and data from Refinitiv saying there are 185.04 million shares outstanding. This is surprising as its parent company also trades on the NYSE and has a market cap of roughly $4 billion.

Based on trailing twelve-month earnings per share of $0.93, AMTD Digital sports a rather exceptional 798 price-to-earnings ratio. This is quite the valuation for the current macabre bear market we are in.

AMTD Digital stock forecast

There are a number of abnormalities in the current trading chart. First, the volume has been rather low all along for a stock rallying 100 fold. With 185 million shares outstanding, the average number of daily shares traded is 1.28 million for AMTD Digital. However, presumably, most of those shares are held in Hong Kong. The actual float is just 19.05 million, meaning that on average about 6.7% of shares are trading. This is fairly high and is likely an ingredient in the price action. 

Looking at the HKD stock 4-hour chart below, readers will see that volume actually trends down on August 1 as the price rises – quite unusual. 

HKD 4-hour chart

HKD share price daily chart below shows how much Accumulation has surged since the very beginning. The figure from the Accumulation/Distribution indicator has steadily risen from just 27,388 shares to 6.8 million in a little over two weeks. This means the buying pressure has been extremely strong.

One thing to note is that the IPO gives the underwriters 30 days to exercise a "green-shoe option" and buy up to 2.4 million additional ADSs at the original price of $7.80. If these were normal times, that would have the effect of cutting off this rally at the knees. 

HKD daily chart

Previous updates

Update: AMTD Digital stock is up just a paltry 5% to $780 half an hour into Tuesday's session. This is an interesting price level, because it it exactly 100 times the price at which shares were sold at the IPO on July 15 (you know, two weeks ago). The insanely bullish and volatile stock opened at $930 and traded up to $942.84 before flagging and falling all the way to $700. More than 50,000 shares traded in the first half hour. The company sits in Hong Kong, so the bullish nature of the price action stands in stark contrast to most other Chinese equities that are selling off on Tuesday due to worries over US politician Nancy Pelosi visiting Taiwan. Some individuals with close ties to Chinese leadership and the Chinese Communist Party have threatened military action against Pelosi, and at least four US warships are stationed near Taiwan.