The company’s stock price rose 200 times in half a month, and its market value exceeded that of Tencent and Pinduoduo. Li Ka-shing made outrageous money

An unpopular company is making waves on Wall Street.

AMTD Digital, which landed on the New York Stock Exchange on July 15, has risen more than 200 times from its issue price of US$7.8 to US$1,679 in just 13 trading days. On the evening of August 3, AMTD Digital once soared to US$2,555.3, an increase of more than 300 times. The latest market value was US$310.7 billion, or about RMB 2.09 trillion.

As of press time, the market value of this recently listed company exceeds that of Alibaba, JD.com, PetroChina, Pinduoduo, NetEase and many other popular Chinese concept stocks, and is only behind TSMC.

But after experiencing the skyrocketing for no reason, doubts about “demon stocks” and “cutting leeks” also followed. On the one hand, the stock price suddenly rose but the trading volume was very small, and many investors questioned the joint hype of capital; on the other hand, according to the prospectus, AMTD Digital was far away from other financial technology stocks, but it was only 200 million yuan last year. Revenue cannot support such a high market value at all.

Is AMTD Digital’s violent rise a bubble or a stock market myth?

Is it because of Li Ka-shing’s platform?

“Amazing, is this the stock I once launched and sold?” “Another company that refreshes cognition, the capital market is really a place where miracles are created.” AMTD Digital’s rise not only stunned Wall Street, but also made a group of retail investors revel.

Back half a month ago, on July 15, AMTD Digital was listed on the New York Stock Exchange. On the day of the listing, the company’s stock price rose by 107%. After a smooth 5 trading days, on July 22, the stock price rose again by 234%.

Subsequently, AMTD Digital continued to rise. In the five trading days from July 28 to August 1, it rose by 134%, 122% and 85% respectively. AMTD Digital even suspended trading for a while due to the abnormal fluctuations in price and price.

In less than a month, AMTD Digital has created a market value myth, but the company’s fundamentals have not greatly improved. According to media reports, some market analysts believe that the skyrocketing stock price is the result of a short- and medium-term consensus on the market capital, and reminds investors to pay attention to risks.

The degree of attention remains high, and many users have turned their attention to the shareholders behind it.

According to public information, AMTD Digital was split from AMTD International, which is an Asian digital financial subsidiary of AMTD Group. AMTD Group was established in 2003 and is involved in asset management, investment banking, insurance brokerage and other fields. One of the founding shareholders is Li Ka-shing’s Cheung Kong Holdings and Hutchison Whampoa.

In other words, behind AMTD Digital is Li Ka-shing, who is worth US$36.5 billion. Backed by financial predators, the “Li Ka-shing” concept stocks ushered in a soaring rise.

However, AMTD Group has not disclosed its shareholding structure. Therefore, it is impossible to know exactly how much wealth Li Ka-shing has gained in this Chinese stock market carnival.

In addition to Li Ka-shing, the shareholders behind AMTD Digital include Greater Bay Area Mutual Home Fund, Value Partners, one of the largest independent asset management companies in Asia, and Jiayu Fund founded by Wei Zhe.

How can a revenue of less than HK$200 million support a high market value?

AMTD Digital became popular, and everyone was stunned. This company is unfamiliar to most people, and AMTD Digital’s valuation is equally puzzling in terms of its main business and performance.

Overall, during the period from 2019 to 2021, the company’s total revenue was approximately HK$14.554 million, HK$168 million and HK$196 million, respectively. Compared with the companies whose market value is overtaken by it, in fiscal year 2021, JD.com’s net income is 951.6 billion yuan; Pinduoduo’s total revenue in 2021 is 93.9 billion yuan. AMTD Digital’s revenue is only a fraction of these companies.

Image Source AMTD Digital Prospectus

From the perspective of the company’s fundamentals, AMTD Digital’s main business includes four major sectors: digital financial licenses and services, digital media content and market promotion, digital network ecological construction and collaboration, and strategic investment under the digital economy.

More interestingly, the prospectus shows that AMTD Digital currently has only 50 employees.

The company’s income is also relatively simple. AMTD Digital’s main source of income is a business called “Cobweb Ecosystem Solutions”.

Simply put, the cobweb ecosystem solution is to connect Asian entrepreneurs and corporate services, help them reach resources, and collect membership fees, which is more like the private sharing clubs and private board meetings currently on the market.

Cobweb ecosystem solutions have always accounted for more than 70% of AMTD Digital’s revenue, and in fiscal year 2021, it will contribute 80% of total revenue, reaching HK$157 million.

However, this core business has gradually fallen into a situation of increasing revenue but not increasing profits. Compared with fiscal year 2020 and fiscal year 2021, AMTD Digital’s spider web ecosystem solution business revenue was HKD 184 million and HKD 157 million, respectively, and profit was HKD 144 million and HKD 117 million. The current profit fell by 2.5% year-on-year.

Looking at the performance indicators alone, AMTD Digital can hardly support the company’s market value of US$300 billion.

After the bubble disappears, high stock prices are unsustainable

In the face of stock price fluctuations, AMTD Digital responded that it will pay close attention to the market to prevent any unusual trading activities or abnormal situations.

AMTD Digital’s hurricane is reminiscent of many abnormal stocks in the capital market.

In January 2021, Chinese e-cigarette company Fog Core Technology was listed on the New York Stock Exchange in the United States, with a surge of 145% on the first day, and its market value rose to US$45.8 billion, or about RMB 300 billion. According to the revenue and profit of Fogcore Technology at that time, the market gave a price-earnings ratio of 3,000 times. The situation at that time was similar to that faced by AM Multiplier. Today, the stock price of fog core technology is 1.48 US dollars, and the latest market value has shrunk to 2.5 billion US dollars.

Another example is GameStop in early 2021. As a U.S. physical retailer of video games, GameStop, whose stock price was only $4.7 at the beginning of 2021, rose 135% on January 27, 2021. The stock price once reached $347.51, and the market value once exceeded $33 billion.

Today, after several rounds of ups and downs, its stock price has been falling and falling. As of press time, GameStop’s stock price was $35.84, with a market value of $10.1 billion. It is reported that Netflix has considered adapting the incident of GameStop’s stock price crash into a movie.

In-depth study of the above two stocks, but also different from Shang Multiplier Mathematics. The “rise” of the stock price of Fog Core Technology is due to the optimism of the capital market for e-cigarettes, a high-repurchase and high-margin consumer product, and the “fu” is due to changes in China’s e-cigarette policy. The ups and downs of Gamestop were caused by the short-selling of the stock by short-sellers, which led to “game fans” who organized to buy stocks, and even Musk contributed to this on Twitter.

Behind the crazy hype is the market’s pursuit of “making quick money”, to get the most income in the shortest time, with high returns, but also high risks.

For companies, high stock prices without performance support are unsustainable, and sudden attention is likely to bring public opinion risks to the company; for investors, such speculation is destined to be short-lived and unsustainable.

After all, the market is ruthless. Investors who catch the last hurdle are likely to pay the price when the bubble disappears and the slump continues.