While there is a raging bear market and stocks have taken a beat in the last few months, a new superstar from Hong Kong called AMTD Digital rocked the American stock market.
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What is AMTD Digital?
AMTD Digital is a little-known company from Asia that is selling club memberships that are supposed to benefit users by connecting businesses. The company reportedly made $25 million in revenue last year and has a little over 50 employees.
AMTD Group is the company’s parent, and its primary services include investment banking, hotel services, premium education, media, and entertainment. AMTD IDEA, another subsidiary of AMTD Group, is also listed on the New York Stock Exchange, valued at around $14 billion. AMTD Digital sold 16 million stocks priced at $7.8 in the initial price offering. The price now is at least 100x higher.
The unbelievable price surge
Just a month ago, very few individuals knew about this company, and now it is making headlines all over the world. The Hong Kong-based firm came out of nowhere and suddenly was worth almost $500 billion. At one moment, it was on the list of 50 biggest companies according to their market capitalization, overrunning Alibaba and almost Meta (previously Facebook). How is this kind of price surge in a bear market possible? That is the question many investors have to ask themselves.
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According to filings, the balance sheet’s total income-generating assets barely exceeded $400 million. However, this did not stop some investors from buying a stock with P/E of over 1 150, P/S of over 1 000, and P/B valued at more than 60. While firms are valued based on their future cash flows most of the time, the staggering market valuation of AMTD Digital is the kind of phenomenon in the financial system that occurs only once in a lifetime.
“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. 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 company itself claimed it is stunned by the stock’s performance. There is no specific explanation behind the skyrocketing stock other than traders and investors following a trending stock with an outlook of massive gains. Early investors indeed made it big. However, those who are entering the market now may be too late to the party.
The bottom line
The astonishing price surge of this stock is dangerously similar to meme stocks’ price increases in 2021, and everyone knows how those stocks ended up. Many analysts agree it is a bad idea to buy this stock at the current levels. Although it may be a great company, this is seriously overvalued.