How a banker fighting a Hong Kong ban broke a Wall Street record

For a former banker facing a two-year ban by Hong Kong’s financial watchdog, Calvin Choi is riding high.

Two weeks after the founder of AMTD Digital rang the opening bell on the New York Stock Exchange floor, his obscure Hong Kong-based financial services company made history. It had the fastest ever share price rise of a US-listed company after an initial public offering, according to data from Dealogic.

After listing at $7.80 on July 15, AMTD Digital shares hit $400 on July 29, a record meteoric rise of more than 5,000 per cent. From there, the stock kept rising, touching a peak of $1,679 in August.

Its market value at one point exceeded that of Goldman Sachs. This is despite revenues of just $21.5mn for the 10 months to February 2022 and having only 50-odd employees in Singapore and Hong Kong.

AMTD Digital, in a statement titled a “Thank you note to our investors”, said it had no idea about the reasons for the historic surge.

Analysts said there is no clear cause of AMTD Digital’s ramp-up, with debate over whether it could be a “meme stock rally” driven by retail investors. The company’s low free float — just 19mn out of 185mn shares were offered in the IPO — means the stock was open to manipulation, said analysts.

Line chart of Market capitalisation ($mn) showing AMTD Digital was briefly one of the world’s largest financial groups

AMTD Digital’s rise is all the more remarkable because it comes as Washington is launching a regulatory crackdown on Chinese companies listed in the US with over 200 mainland and Hong Kong groups facing delisting in 2024 if they do not comply with audit requirements.

AMTD Group was founded in 2003 by Hong Kong tycoon Li Ka-shing’s CK Hutchison Holdings and Commonwealth Bank of Australia. Together with its main subsidiaries, AMTD Idea and AMTD Digital, it offers investment banking, asset management, insurance brokerage and digital financial services.

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AMTD Digital’s main product is its so-called SpiderNet, which it vaguely defines as a “superconnector ecosystem” for its clients.

Choi, an accountant by training, joined AMTD Group in 2016 as chair after five years at UBS and before that PwC and Citigroup. He set up AMTD Digital and became involved in multiple charitable and social foundations and trusts.

A regular attendee at events such as the World Economic Forum in Davos, Choi cultivated relationships with important companies including Chinese tech group Xiaomi and prominent business families. Andrew Chiu, the grandson of the late Hong Kong tycoon Deacon Chiu, was previously vice-chair of what is now AMTD Idea.

On AMTD websites, Choi regularly praises the Chinese Communist party, citing China’s president Xi Jinping and his goal of staging the “great rejuvenation of the Chinese nation”.

Line chart of Share price since listing ($) showing AMTD Digital’s share price bubble

AMTD Digital’s July IPO was the third international listing of a group company that Choi has engineered in as many years. The group’s investment bank, AMTD Idea — formerly AMTD International, the main stakeholder in AMTD Digital — was listed on the NYSE in 2019 before completing a secondary listing in Singapore the following year.

The New York-listed shares of AMTD Idea soared 525 per cent after AMTD Digital’s listing. A 2017 application to list the group’s insurance subsidiary, AMTD Strategic Capital Group, was rejected by Hong Kong’s exchange for reasons that were not disclosed.

Choi became a billionaire with the surge in AMTD Idea and AMTD Digital shares but the group is facing regulatory scrutiny over the share price rally. The Singapore Exchange said in a statement to the Financial Times a subsidiary was in communication with NYSE over the volatility.

“Choi is a master marketer. He gets close to major institutions such as Singapore’s Monetary Authority and political figures such as [former Hong Kong leader] Carrie Lam but it was always style over substance,” said one person involved in due diligence on AMTD. Choi and AMTD did not respond to multiple requests for comment.

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The scrutiny on Choi comes as he is battling regulators in his hometown, Hong Kong. He is appealing a ban by the city’s Securities and Futures Commission related to a share sale at AMTD Group in 2015. Choi was still at UBS, which was the financial adviser for the sellers including Morgan Stanley Private Equity Asia, then a major shareholder of AMTD Group.

The SFC found Choi was involved “in the business” of one of the buyers, LR Capital Group, a global investment company and a multifamily office, according to an AMTD website.

He “directed the decision-making” at LR Capital in connection with the sale, and “exceeded the scope of a typical coverage banker”. This was done without disclosure to Morgan Stanley or UBS, placing him in potential conflict of interest, the SFC said.

The regulator also accused him of a conflict of interest again involving LR Capital in an initial public offering in 2014 and in January this year decided to ban him from the industry for two years.

The SFC did not disclose the nature of Choi’s alleged relationship with LR Capital. But shortly after the Morgan Stanley sale, he took over as chair of AMTD Group. His appeal against the SFC decision is scheduled for a December hearing.

AMTD Group claims to be a “leading investment firm”, underwriting 16 US initial public offerings since Choi joined the company and raising a total of $13.4bn, according to figures from Dealogic.

Yet shares in all of those companies are now trading at an average of 75 per cent below their IPO price.

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AMTD Group has also had to restructure $718mn in bonds raised since 2019, with bondholders in February agreeing to extend the notes’ maturity by three years and reduce interest payments. One of AMTD’s bonds was originally due in March. Its $500mn bond is trading at 46 cents on the dollar.

Hong Kong tycoon Li Ka-shing’s CK Hutchison Holdings disavowed the company earlier this month, saying it had no business dealings with AMTD Digital and was selling the “less than 4 per cent” of shares it still had in AMTD Group.

Other projects appear stalled. Together with Chinese tech giant Xiaomi, AMTD won a coveted digital banking licence in Hong Kong in 2019 but industry insiders are confused by the bank’s strategy.

“They are the most inactive of the virtual banks,” an adviser to Hong Kong’s virtual banks said. “They have no real marketing in Hong Kong, people in the industry wonder what they are doing.”

Although AMTD’s share price has begun to fall, analysts said regulators should look more closely at the company.

Nate Anderson, from short seller Hindenburg Research, accused the NYSE of ignoring “glaring issues” and focused on collecting listing fees over protecting the integrity of US markets. The NYSE declined to comment.

“The US Securities and Exchange Commission’s antennae should have been up,” said Mak Yuen Teen, a professor of accounting at the National University of Singapore about the AMTD Digital listing.

Having so many shares held by the parent was another red flag, Mak said. “With all [these issues] considered, why were they allowed to list?”

Additional reporting by Hudson Lockett and Tabby Kinder in Hong Kong