Chinese Stock’s 13,000% Surge Creates Another US IPO Mystery

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(Bloomberg) -- Another Chinese steadfast is baffling investors with monolithic gains connected its archetypal time of trading successful the US, pursuing connected from stellar debuts for AMTD Digital Inc. and Magic Empire Global Ltd.

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Addentax Group Corp. soared arsenic overmuch arsenic 13,031% connected Wednesday successful its debut session, triggering much than 20 volatility halts. Its marketplace capitalization has ballooned to $20 billion, making it bigger than astir a 3rd of S&P 500 Index members.

Addentax, which lists garment manufacturing and logistics services among its cardinal businesses, is astatine slightest the eighth steadfast this twelvemonth from Hong Kong oregon China to acquisition likewise astonishing moves pursuing archetypal nationalist offerings successful the US. The Nevada-based holding institution did not instantly respond to an emailed seeking remark and calls to numbers listed connected its website went unanswered.

AMTD Digital and Magic Empire, some of which are fiscal services companies based successful Hong Kong, made headlines earlier this 4th arsenic shares mysteriously soared by thousands of percent contempt opaque fundamentals, earlier the rallies fizzled out. AMTD Digital Inc. astatine 1 constituent became bigger than Goldman Sachs Group Inc.

“The driving unit down the Addentax Group’s terms seemingly deliberately duplicates the communicative of HKD and MEGL, which besides experienced an unprecedented share-price frenzy recently,” said Hebe Chen, an expert astatine IG Markets Ltd.

She said the commonality betwixt them includes the information that they each travel from accepted industries and person not-so-stellar financials.

The rally means that the stakes of Chairman and Chief Executive Officer Hong Zhida, and his member Hong Zhiwang -- who is simply a manager -- magnitude to immoderate $1.3 cardinal successful total. CEO Hong owns 4.8% of Addentax’s communal stock, portion his member has 1.6%, according to the prospectus.

Listed primitively successful 2015, erstwhile it identified itself arsenic a ammunition company, Addentax successful December 2016 acquired a cardinal involvement successful its existent large operating entity called Yingxi Industrial Chain Group Co. The institution was trading connected an over-the-counter marketplace for US stocks called OTCQB Marketplace anterior to its listing connected the Nasdaq this week.

According to its prospectus, Addentax utilized the aforesaid underwriter -- Network 1 Financial Securities Inc. -- arsenic Magic Empire.

Modest Revenues

Like Magic Empire and AMTD Digital, Addentax has humble revenues that let for relaxed disclosure requirements nether US laws. For the twelvemonth ended March, gross dropped 49% to $12.7 cardinal but it turned a profit, according to the prospectus.

Chen from IG Markets says it is “more than likely” that the Addentax volition travel the pathway of AMTD and Magic Empire soon. The second 2 person mislaid much than 90% from their respective peaks.

(Adds details connected size of stakes successful seventh paragraph.)

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