Newly minted meme stock darling AMTD slides after eye-popping surge

NEW YORK — Shares of AMTD Digital plunged 40 per cent on Wednesday (Aug 3) to snap an eye-popping rally fuelled by retail investors this week that briefly took the Hong Kong-based fintech's market value past that of Facebook-owner Meta Platforms.

The company's market capitalization closed above US$300 billion (S$413 billion) in a 128 per cent jump on Tuesday, reminding investors of the meme stock mania last year that drove record rallies in shares of companies such as GameStop and AMC.

The stock has risen about 21,000 per cent since its July IPO, when it listed at a price of US$7.80. It was trading at US$1014.98 on Wednesday.

"It sure looks a lot like a pump-and-dump," Mr Nate Anderson, founder of Hindenburg Research, said, adding that it does not have a position in AMTD Digital. "It seems to have caught on among retail investors, which is often the fuel for these situations."

In a typical pump-and-dump scheme, investors create artificial demand to boost companies' stock prices and then sell their own shares at a profit causing prices to fall, saddling others investors with losses.

AMTD Digital was also the most-mentioned stock on Reddit, the social media platform central to the meme stock craze of 2021.

The company said on Tuesday there was no material change or event related to the company's business and operating activities since the IPO date and that it was monitoring the share volatility.

The fintech firm, which provides loans and services to start-ups in exchange for fees, has a low float and is tightly controlled by parent company AMTD Idea.

AMTD Idea's shares also slid 4 per cent after closing Tuesday with a market value of US$2.6 billion.

"(AMTD Digital) is clearly the newest meme stock with bands of retail traders purchasing the stock at the same time, pushing the price sharply higher," said Ms Victoria Scholar, head of investment at Interactive Investor.

There has been a similar, but smaller, surge in some other recently listed United States (US) companies, including Getty Images which jumped over 200 per cent since its debut on July 25.

"Should this market rebound have more legs, we expect retail investors' appetite for speculative stocks to continue, as they seek the opportunity to further scratch back the losses they’ve accumulated through the year," said Mr Lucas Mantle, a data science analyst at Vanda Research. REUTERS