Alpha Technology Group Limited (NASDAQ: ATGL) stock is up 136% on the day. It’s also up 580% or so since its IPO at the beginning of the month. This strikes us as being excessive - excessive to the point of nonsense. In fact, we would insist that this is a repeat of the AMTD nonsense. Which at one point had a newly listed and very small Hong Kong financial firm as worth more than Goldman Sachs. There was then a flurry of vaguely Hong Kong, vaguely financial, firms that soared - MEGL, TOP Financial and others. For some of those companies the underlying business was just fine - even if the stock price went nuts on them. For others there was a little more cloud than visibility into what they actually did. This also spread to the London market where RC365 Holdings went up 1,000% and then came back down 90%.
Note what we are not saying - that there’s anything wrong with Alpha Technology itself. The business line is: “Alpha Technology Group Limited, an investment holding company, provides IT development and consulting service in Hong Kong. The company primarily offers cloud-based customer relationship management systems and enterprise resource planning systems development; customized web and mobile application development; artificial intelligence powered optical character recognition service software development; and technological support and maintenance and other services.” There’s nothing wrong with being a tech company offering services. Even if that is then sprinkled with the magic word “investment”.
Alpha Technology Group Ltd stock price from Google Finance
Alpha Tech is just fine, it’s ATGL stock - more specifically the stock price - which is well out of line. After all, the original advice from an analyst that we at least respect was: “ATGL is tiny in size, management has not shown an ability to generate meaningful revenue from within its existing region of focus, it has continual operational risks inside the PRC and a stated goal of international expansion through acquisition without any history of success. In addition, its valuation assumptions are highly excessive, so my outlook on the IPO is to Sell.
OK, that advice wasn’t right but we’d put it as that advice isn’t right *yet*. We really do not think this is worth $200 million and counting. So, we expect it to come back down again. But that expectation brings with it its own problem - when? After all, AMTD Digital did go to an over $300 billion (yes, b, billion) valuation before reality took hold.
Alpha Technology? Speculative bubble that’ll burst - it’s the when and from what price that’s unknowable.