CK Group cuts ties with AMTD after 32,660pc stock surge

CK Group said it does not hold any shares in AMTD Digital and has no business dealings with the company, whose shares jumped as much as 32,660 percent at one point in less than three weeks since its US debut, raising eyebrows across Wall Street.

Billionaire Li Ka-shing's conglomerate said in a statement yesterday that it is selling the remaining stake of less than 4 percent it holds in AMTD Group, parent of AMTD Digital.

CK Group - a founding member of AMTD Group in 2003 that sold most of its shares almost a decade ago - said it has no representative on AMTD Group's board and is not involved in its operations.

AMTD Digital's shares plummeted by as much as 29 percent at pre-market trading last night and narrowed the loss to about 10 percent as of 8:50pm after CK's statement.

They dived by 34.5 percent to US$1,100 (HK$8,635) on Wednesday before the news but were still up by more than 14,000 percent compared to its offering price of US$7.80.

The combined market value of its Class A and Class B shares was more than US$203 billion at the close.

That means the firm -- which develops digital businesses, including financial services -- is worth more than Morgan Stanley and Goldman Sachs, despite reporting just US$25 million in revenue for the year ended April 2021.

At least on paper, that makes it the fifth-biggest financial company in the world, trailing Berkshire Hathaway, JPMorgan Chase, Bank of America, and Industrial & Commercial Bank of China.

It is a mystery why the stock had surged, though some analysts pointed to its tiny public float.

They called the gains unjustified after its market value exceeded US$400 billion at one point this week with the bulk of that coming from its Class B shares, which are not publicly traded. Even the company itself has said it does not know of any "material" events that should be affecting the stock price.

Anli Securities chairman and chief executive Andrew Wong Wai-hong believes the recent rallies of the stock had nothing to do with its ties with Li but, rather, the sponsors' efforts to push up the price.

Wong said there was no way its business fundamentals could possibly support such a huge market capitalization, but it was hard to pinpoint when or how much the shares would drop.

It is also not clear why investment bank AMTD Idea Group, another stock under the AMTD Group umbrella, has joined in the rally, soaring 458 percent between July 15 and Wednesday's close.

That stock was the fourth-most-bought company on Fidelity's trading platform on Wednesday despite sliding 11 percent, indicating it has become a favorite of retail traders.

Hong Kong stock exchange rejected AMTD Group's plan to spin off AMTD Strategic Capital to list in the city back in 2017.

And according to Chinese media outlet Caixin, the bourse believed the company's investment business may involve "proprietary trading" - using the firm's own money to conduct self-promoting transactions.

The group later spun off AMTD Idea Group, which is listed both in Singapore and the US.

AMTD Digital was established 2019.

The eye-popping gains have heightened scrutiny of Calvin Choi Chi-kin, AMTD Group's chairman, chief executive officer and major shareholder who joined in 2016 after spending five years at UBS.

Choi, a Hong Kong native and Canadian citizen who studied accounting at the University of Waterloo, is the sole owner of a vehicle that controls 32.5 percent of AMTD Group.

AMTD Group owns 50.6 percent of boutique investment bank AMTD Idea Group, which in turn owns 88.7 percent of AMTD Digital.

Earlier this year, Hong Kong regulators banned Choi from the securities industry for two years for failing to disclose conflicts of interest in transactions he worked on while at UBS. He is appealing the decision.

China Minsheng Investment, an AMTD Group investor that installed Choi as CEO, turned against him and at one point placed banners in Hong Kong's central district denouncing him.

While the recent rally in the US was reminiscent of the retail trading mania that drove up shares of companies including GameStop last year, some Reddit and Twitter users appeared baffled by the gains, denouncing claims that the sub-reddit WallStreetBets was behind the moves.

"Given the speed of its ascent, I have a feeling this one will nosedive," said Oktay Kavrak, director at Leverage Shares.

adrien.he@singtaonewscorp.com