Magic Empire Global Ltd (NASDAQ: MEGL) saw its share price skyrocket by 115.69% yesterday, climbing by an additional 8.02% in trading today. The company, listed on the NASDAQ on the 5th of August at USD 97.00, has seen volatile trading patterns caused by retail investors. We investigate what Magic Empire Global is and why it has become a darling among the meme stock community.
What is Magic Empire Global?
Magic Empire is a Hong Kong-based financial services company predominantly engaged in helping companies with initial public offerings (IPO) while providing underwriting, financial, and compliance advisory services. It was incorporated in 2016 and, at present, has nine employees.
The company recorded revenue of HKD 16.87 million (USD 2.16 million) in 2021, which was down from HKD 20.42 million in 2020. The company claims this was due to decreased revenue derived from its IPO sponsorships and underwriting services. Magic Empire’s net income also saw a significant decline over the years. The net income margin fell from 20.57% in 2020 to 9.35%, or USD 0.2 million in 2021.
Why is Magic Empire experiencing massive share price movements?
There appears to be only one reason this stock has seen such heightened interest amongst the meme stock community, another company in a similar industry experienced the same thing. On July 15th, AMTD Digital (NYSE: HKD) — a Hong Kong-based financial technology company — was listed on the New York Stock exchange for USD 16.21 per share, with its share price peaking at USD 1,679.00 on the 2nd of August. Since then, it has dropped to USD 192.18, giving it a market capitalization of USD 35.56 billion on revenues of USD 25.2 million in 2021.
Once again, no one seems to know why this stock saw such explosive growth. Even the company’s management and founder are baffled by this. Investors who missed out on this opportunity may have seen Empire Global as the next great play when it was listed in early August, as the companies were in a similar industry and were both from Hong Kong.
However, Empire Global has experienced a vastly different story. The company saw its share price jump by 20.62% in just three days after its IPO. Since then, its market capitalization collapsed by 92.97% by the end of trading on Friday as investor sentiment toward the stock cooled off. Now we are seeing renewed interest in the company, with its share price more than doubling this week as investors try to replicate the returns generated by AMTD Digital.
At MyWallSt, we encourage people to invest with a long-term mindset. This significantly reduces the risk to your portfolio of short-term volatility and increases the chances of generating a profit. Meme stocks are highly volatile, meaning that investors could earn decent gains, but the possibility of huge losses is much higher.
Shane Vigna, Author at MyWallSt Blog