AMTD IDEA (NASDAQ: AMTD) (SGX: HKB) stock will jump 300%. AMTD stock leaping 3x is not the result of some return of the meme stock idea that prevailed a year or so back. When anything Hong Kong and financial leapt into the stratosphere. TOP Financial, for example, a perfectly respectable futures broker, soared into the stratosphere before, obviously, collapsing back to something like objective value. Or AMTD Digital was worth more than Goldman Sachs soon after its IPO: and obvious absurdity. Magic Empire Global was another one. Simply the m markets gripped by the delusion that the wily sons of the Orient were going to conquer the world’s financial space. Or even a bubble that all knew was a bubble but what fun to play, eh?
Such fun and games ended, as all such fun and games do. The varied share prices are deflated. Which then poses a problem. For Nasdaq listings are real things, not just playthings, and they come with real rules attached. One of which is the $1 minimum bid price. You must keep the stock price above that magic number or, after some time - usually 18 months - the quotation is lost and it’s off to the OTC wth you. This is where AMTD IDEA is currently failing.
AMTD IDEA stock price from Google Finance
Since the very idea of coming to market is to be on the market therefore something must be done. The usual solution is a reverse stock split. As the AMTD IDEA quote is actually an ADS, not the direct stock itself, this becomes a change in the ADS or ADR ratio. Instead of one ADR/ADS representing two underlying stock it will now be 6. The effect of this is as with a one for three reverse stock split: “AMTD IDEA Group (NYSE: AMTD; SGX: HKB) (“AMTD IDEA” or the “Company”), today announced that it will change the ratio of its American depositary shares (“ADSs”) to its Class A ordinary shares (the “ADS Ratio Change”), par value US$0.0001 per share, from one (1) ADS representing two (2) Class A ordinary shares to one (1) ADS representing six (6) Class A ordinary shares, effective on or about November 17, 2023, U.S. Eastern Time (the “Effective Date”).”
This doesn’t change the underlying business valuation, just the number of pieces of paper that make it up. Therefore the pieces of paper change in value - up 300% or 3x. This also doesn’t change the underlying business either. Our strong suspicion - and it is only an opinion - is that the whole structure is a way of moving control of assets offshore from the Mainland. We could be wrong on that, sure we could, but we’re not sure that AMTD is really investable by outside shareholders all the same.