AMTD Digital Inc. Called ‘Mother of All Shorts’ is a Very Risky Business

An analyst called AMTD Digital — urging its leader to ban Hong Kongof the securities industry – “the mother of all shorts.”

Still ask professional short sellers about it store, and they are more likely to say that it is an incredibly risky stock to bet. The AMTD’s small free float and low turnover make borrowing stocks extremely expensive for short sellers, while its extreme volatility can wipe out bearish positions in an instant.

“As a professional short seller, you want to be a mile away from it,” Soren Andahl, whose Blue Orca Capital is best known for betting against companies based in China and Hong Kong, said in an interview . “It’s so volatile it’s actually dangerous.”

This frugality helps explain why AMTD Digital – lesser-known even within Hong Kong financial circles, until its eye-popping profits – is still valued at over $30 billion, which makes it almost half the companies. makes it bigger. S&P 500 Index,

With stocks like GameStop and Bed Bath & Beyond Inc. climbing once again, AMTD Digital provides a clear reminder that seemingly irrational gains may last longer than warrants. This is partly because shorting stocks is so risky, a lesson that hedge funds including Melvin Capital Management learned the hard way with money-losing bets against stocks including GameStop.

AMTD Digital is raising eyebrows across Wall Street after a mysterious rally that jumped more than 32,000% at its peak. At one point the company was valued at about $400 billion on paper, more than the likes of Goldman Sachs Group Inc. and JPMorgan Chase & Co. Other newcomers to Hong Kong or mainland China have also posted similar inexplicable gains, drawing the attention of US regulators.

AMTD Digital has not returned multiple requests for comment. It said in a statement on August 2 titled “Thank you note to investors” that it was monitoring the market for any trading abnormalities and was not aware of any “material circumstances, events, nor other matters”. which can affect the price of the stock.

Market observers interviewed by Bloomberg are baffled by the move. Telemer Ltd. became the first and only brokerage to begin coverage of the company, according to data compiled by Bloomberg, assigning it a sell rating on Monday in a report titled “AMTD Digital: The Mother of All Shorts.”

While gains at AMC and Gamestop were driven by a coordinated effort among retail investors to squeeze out short sellers, Telemer analyst Nirgunan Tiruchelavam said AMTD is “a very curious case.”

AMTD Digital’According to market data, the short interest as a percentage of the outstanding shares is less than 0.1%. A major obstacle for bears is the extremely high cost of borrowing to sell the stock in a short period of time. AMTD Digital’s IPO prospectus lists revenue from contracts of just $21.5 million and profit of $23.9 million for the ten months ended in February.

As of Monday, investors were required to pay an annual interest rate of 900%, according to Blue Orca’s Andal. This compares to about 1% for companies with larger market capitalizations.

Only 10% of AMTD shares are available for trading, limiting the pool for investors and making the stock more susceptible to wild swings.

“There’s a lot easier things to lose,” Aandahl said.

This story has been published without modification in text from a wire agency feed. Only the title has been changed.

first article