Bankers became billionaires in an instant, then fell to 89%

Read more about Magic Empires Mystifying Price Surge

Two founders of a little-known Hong Kong investment bank briefly became billionaires in recent days following a confusing stock market run, only to see their paper fortunes plummet as shares plunged.

Magic Empire Global Ltd., which provides underwriting and advisory services and has helped just one company go public in two years, has soared 6,149% since its U.S. debut on Friday, giving it a market value of $5 billion at one point.

That meant co-founders Gilbert Chan and Johnson Chen held stakes worth $1.8 billion and $1.3 billion, respectively, according to data compiled by Bloomberg.

The duo together control around 63% of the company.

However, the stock plunged 89% on Tuesday to close at $12.32, just three times higher than its initial public offering price of $4.

Chan’s stake is now worth around $90 million and Johnson’s is valued at $65 million.

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Magic Empire is the latest in a series of inexplicable moves following U.S. IPOs of Chinese or Hong Kong companies, places that have sometimes produced billionaires in mysterious ways.

The consultancy had just nine employees at the end of last year and reported that revenue fell 17% to $2.2 million in 2021.

Since its inception in 2016, it has made eight listings – one has since been delisted and the others are trading below their IPO price.

Learn more about Magic Empire’s mystifying price spike

Chan, president of Magic Empire, studied accounting at the Chinese University of Hong Kong and worked as an auditor before spending nine years in the corporate-finance division of CCB International Capital Ltd. Chen, the company’s managing director and Chan’s former college classmate, was an auditor at KPMG before joining Guotai Junan Capital Ltd.

The pair, both 41 at the time of the August 4 IPO prospectus, believed there was a lack of corporate finance advisers for small and medium-sized businesses in Hong Kong and set up Giraffe. Capital Ltd., the operating entity of Magic Empire.

The name was inspired by Chan’s son, who loves the animal, Chan said in an interview with the Hong Kong Institute of Chartered Accountants last year.

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Chan owns a 36.8% stake in the company, while Chen owns 26.3%.

A representative for Magic Empire declined to comment on the stock’s performance and the founders’ wealth.

Last week, AMTD Digital Inc. briefly outgrew Goldman Sachs Group Inc. and almost every financial company in the world despite having just $25 million in revenue for the fiscal year ending April 2021.

At least five other companies, including Ostin Technology Group Co., Golden Sun Education Group Ltd. and Intelligent Living Application Group Inc., posted intraday gains of 395% or more on day one of trading.

Learn more about AMTD’s 32,000% rise and subsequent fall

“These volatile stocks have several things in common: low liquidity and low market value before the surges,” said Kenny Ng, strategist at Everbright Securities International in Hong Kong.

“Investors should avoid excessive speculation as the current unrealistic price has strayed too far from financial fundamentals.”

–With the help of John Cheng.

(This story has not been edited by NDTV staff and is auto-generated from a syndicated feed.)

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