The underwriter of AMTD Digital, which saw its stock price surge over 32,000 percent following its IPO, was reportedly probed by Hong Kong’s Securities and Futures Commission. 

AMTD Group was investigated by the SFC prior to the US listing of its unit AMTD Digital, according to a «Bloomberg» report citing unnamed sources. The probe into AMTD Group’s underwriting arrangements began as early as November and included searches of the investment bank’s office as well as the home of its chairman and ex-UBS banker Calvin Choi in February 2021. 

Separately, Choi is appealing the SFC's decision to ban him from the securities industry for two years over what the regulator said were conflicts of interest while he was a dealmaker at UBS.

AMTD has been recently placed in the spotlight after the share price of its newly listed digital unit surged more than 32,000 percent earlier this month, at one point exceeding the market capitalization of corporate giants like Walmart and Exxon Mobil, despite annual revenue of just $25 million last year. 

Use of IPO Proceeds

Part of the SFC’s probe involves small cap IPOs underwritten by AMTD Group including the listings of health tech firm IntelliCentrics Global and television producer China Bright Culture Group. 

In 2021, the Hong Kong exchange sanctioned two executives from IntelliCentrics Global for using more than 90 percent of its 2019 IPO proceeds to buy offshore promissory notes via AMTD. China Bright Culture Group used 60 percent of its IPO proceeds to buy promissory notes issued by LR Capital Property Management which were later fully redeemed. Choi’s father held a stake until December 2021 in the Cayman Islands-based firm which shares the same address and company secretary as LR Capital Management, a former majority owner of AMTD Group. 

Close Links

According to the report which also cited people with knowledge of AMTD's deal arrangements, the Hong Kong investment bank worked closely with select investors to fill gaps in demand for IPOs while the issuer would invest similar amounts into wealth products managed by AMTD-linked firms. A post-IPO rise in the share price would result in the investors selling and sharing profits with the listed company which would, in turn, redeem investments in its AMTD-linked wealth products.  

In addition, the issuer also agreed to cover the losses of the select investors in the IPO. 

According to Hong Kong’s listing rules, underwriters are prohibited from allocating IPO shares to «connected clients» or nominee companies without disclosing the ultimate beneficiary, unless prior consent was obtained from regulators. 

AMTD Group was founded in 2003 by Commonwealth Bank of Australia and Li Ka-shing’s CK Hutchison Holdings. It has helped arrange at least 62 IPOs in Hong Kong and the US.