Hong Kong's Securities and Futures Commission is investigating AMTD Group Co. whose stock tumbled more than 90 percent after posting an astronomical rise to $2,555 from an IPO price of $7.8. The shares closed at $186.93 on Wednesday.
At one point AMTD Digital's market capitalization went above $400 billion only to nosedive soon, wiping out billions of dollars of investor wealth. At its peak, the little-known ATMD's market capitalization had surpassed those of financial behemoths like Goldman Sachs Group and JPMorgan Chase.
Meager Sales of $25 Million
Financial market specialists were baffled by the fact that AMTD's IPO prospectus had listed total sales of only a meager $25 million for the year ended April 2021. Still, in a repeat of market frenzy witnessed around GameStop, billions in investor wealth evaporated in a short period of time, raising questions over lax scrutiny in the financial world.
What is AMTD Digital?
AMTD Digital Inc. (NYSE: HKD) says it is a comprehensive digital solutions platform in Asia. Its one-stop digital solutions platform operates four main business lines including digital financial services, SpiderNet ecosystem solutions, digital media, content and marketing, as well as digital investments. The company claims it is the 'fusion reactor at the core of the AMTD SpiderNet ecosystem' and empowers and integrates the various digital businesses within its ecosystem.
Bloomberg reported exclusively that Hong Kong's Securities and Futures Commission searched the offices of AMTD Group as well as the home of the Chairman in February 2021. AMTD Digital is run by former UBS Group managing director Calvin Choi.
Arrival of Calvin Choi
AMTD Group was established way back in 2003 by Commonwealth Bank of Australia and billionaire Li Ka-shing's CK Hutchison Holdings Ltd. The company was initially engaged in insurance brokering.
Who is Calvin Choi?
Calvin Choi, who is a Hong Kong native and Canadian citizen, joined the company in 2015 and under him AMTD started to focus on investment banking, asset management and financial technology. The executive is now the sole owner of a vehicle that controls 32.5% of AMTD Group, Bloomberg reported, citing a regulatory filing.
Choi has been banned from the securities industry for two years by the Hong Kong securities watchdog over alleged conflicts of interest linked to his previous role at UBS. Choi rejected the charges. "There are those who envy and [are] jealous, and those who are cold-eyed and mockers, and malicious, there are slanderers ... However, entrepreneurs must insist that development is the last word," he said in a statement, according to Bloomberg.
According to the SFC, Choi had failed to disclose his links to L.R. Capital, which was instrumental in closing the deals he struck during his days at UBS.
Choi has denied the charges and has launched an appeal against the ban. His case is going into hearing in December.
Choi was also accused of financial fraud by China Minsheng Investment Group, which has a major stake in AMTD Group.
Boom and Bust
The rise in the fortunes of the Hong Kong banker was astonishing. Less than a month after the fairy tale IPO of AMTD Digital on the New York Stock Exchange, his net worth zoomed to $37 billion, making the 43-year-old Asia's sixth richest person. However, analysts had warned that the 14,000 percent rise in the stock price was too good to hold and that the company itself could not explain the reasons behind the rapid rise in share price.
Parallels were drawn to the meteoric rise of GameStop a few years ago, as well as the boom and bust in meme tokens propelled by cult-like investors. As of February AMTD Digital had only around 50 employees across offices in Hong Kong and Singapore.
