A handful of US-listed companies from mainland China and Hong Kong have recorded inexplicable price movements after their initial public offerings in 2022. Could this be a return of the meme stock mania?

Following the recent inexplicable share price surge of AMTD Digital – backed by Li Ka-shing’s CK Group which is reportedly distancing itself by selling its remaining stake in parent AMTD Group – another newly US-listed Chinese firm has experienced wild market swings. Hong Kong-based Magic Empire Global is the latest to join the frenzy after its stock soared 2,325 percent in its debut session last Friday.

According to public data, seven out of the 10 IPOs from Hong Kong and mainland China-based companies registered extraordinary price movements, including an intraday gain of around four-fold or more on their first day of trading. 

Could this mark the return of the meme stock mania?

Hong Kong Financials

Interestingly, three out of the seven companies spotlighted are based in Hong Kong and they all operate in the financial services industry. 

AMTD Digital is a Hong Kong-based digital solutions provider, mainly to clients in the financial sector. It is a subsidiary of AMTD Group, an investment banking, asset management and insurance services provider as well as a joint owner of Hong Kong-licensed virtual bank Airstar, alongside mobile giant Xiaomi. 

Magic Empire is a financial firm that provides underwriting and advisory services. TOP Financial Group (originally named Zhong Yang Financial Group) is a Hong Kong-based online brokerage firm and its share price peaked at $44.26, an eight-fold increase from its IPO which was priced at $5 per share in June.

The remaining four are diversified across education, industrials, consumer goods, and technology.

Weak Fundamentals

One of the most obvious parallels between the current price upswings and the meme stock mania of 2021 is the lack of supporting fundamentals.

Magic Empire’s market capitalization peaked at $4.7 billion after its debut session saw an intraday surge of nearly 5,800 percent before closing lower. The company recorded $2.2 million in revenue in 2021, down 17 year-on-year, and its operating entity, Giraffe Capital, completed just one IPO in 2020 and none last year, according to its prospectus. AMTD Digital’s market capitalization reached $400 billion at one point – surpassing corporate behemoths like Walmart or Exxon Mobil – despite reporting annual revenue of just $25 million last year. 

«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,» AMTD Digital said in a statement last week. «The company is also monitoring the market closely for any unusual trading activities or abnormalities.»

Not Stonks?

But onlookers believe that this will not be a rerun of the meme stock mania with the parallels ending at the dramatic price action and weak fundamentals, due to a key issue: the lack of retail participation. 

In addition to the missing hallmarks of related viral memes and highly popular forum posts, trading volume is also short. At its peak level, AMTD Digital’s trading volume registered 2.4 million shares – less than 12 percent of the outstanding shares in the market – compared to GameStop which recorded trading volumes equivalent to three-fold or more of the available shares early last year.

«Gamblers gamble more the more they lose. #Silliness,» according to a social media post by Michael Burry, a renowned US investor who famously predicted the 2008 housing crash.