Are Reddit traders back at it again?
After listing in New York, a small, obscure Hong Kong company called AMTD Digital (HKD) exploded a crazy 14,000% before crashing this week—which then inspired a bout of sporadic rallies in US companies.
In the past week, movie theater chain AMC jumped 64%. Video game retailer GameStop
The sudden, baseless interest in these companies prompted speculations about the comeback of Reddit traders and even market manipulation. But the real culprit here could be a mere typo.
AMTD is not a meme stock
Let’s take a closer look at AMTD’s boom and bust.
AMTD is a three-year-old fintech company based in Hong Kong, which debuted on the New York Stock Exchange on July 15. On the listing day, the stock was trading at $7.8. At its intraday peak last Wednesday, the stock was selling for $2,555.
Consider how insane the latter price is:
- At $2,555, AMTD’s price translated to a $470 billion market cap, which put a mere 50-person company among the top-10 most valuable companies in the world, beating giants like Visa
, Tencent, and Meta.
- Meanwhile, the company generated just $22 million in earnings in the past year. This means that at its peak, the stock was trading at a p/e of 15,000. That’s 15x more expensive than Tesla’s
“richly valued” stock.
But while AMTD ticks all the marks of a meme stock—it’s a small, obscure, and insanely overvalued—there’s one oddity that gives away that it may not be one. It has to do with trading frequency.
As Bloomberg’s eagle-eye columnist Matthew Brooker pointed out:
“The height of the GameStop fever, early last year, was accompanied by a surge in volume. On Jan. 22, 2021, for example, when the price rose 51%, the number of shares changing hands totaled 788.6 million. That’s more than three times the stock available for trading, known as the float. By comparison, AMTD Digital’s volume peaked at 2.4 million shares on July 28 — less than 12% of the outstanding listed total. ”
A self-fulfilling “memephesy”
In all likelihood, AMTD is just one big misunderstanding, and there’s one sound theory that may explain it: mistaken tickers.
As Brooker speculates, “Could mistaken identity even have played a part? AMTD Digital has an interesting stock ticker — HKD, better known as the abbreviation for the Hong Kong dollar. Meanwhile, the ticker of AMTD Idea is AMTD — curiously close to AMD, for Advanced Micro Devices Inc., a $158 billion company with a far bigger public float that has rallied 33% since the start of July.”
It wouldn’t be the first time. Think Zoom Technologies’s 70,000% rally in 2019 when Robinhood investors confused it with Zoom Video Communications, a company that runs the world’s #1 video conferencing platform.
That means the recent “mementum” in a handful of stocks isn’t a prelude to a new meme stock craze. It’s most likely just a self-fulling prophecy that will dwindle as soon as the market trips again.
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