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AMTD Digital and other meme stocks are 'lottery tickets' not investments – IG North America CEO

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IG North America CEO JJ Kinahan said Friday that market participants should keep the “right perspective” when putting money into stocks like AMTD Digital (NYSE:HKD), which skyrocketed more than 32,000% in less than a month amid a wave of retail trader interest.

Speaking to CNBC, the head of the North American unit of online trading provider IG Group referred to these stocks as “lottery tickets” and warned people buying meme stocks not to view them as potential long-term investments.

“This is not actually investing. This is taking a shot,” he said.

Kinahan added: “If you’re playing it like you’re playing a lottery ticket, that’s fine … if you’re playing this by saying you’re investing by playing in these stocks, well, that’s just a terrible premise overall.”

IG North America CEO called meme-stock trading “fun” but “not really healthy,” although he sees some long-term value in the process, in that it can get younger people interested in the overall stock market, which could lead to more constructive investing habits down the road.

“If this is the type of activity that has to bring younger people to the market so that hopefully they continue to participate in their 401(k)s, then, I guess, the ends justify the means,” he said.

HKD, a Hong Kong-based developer of digital entertainment platforms, came public in July through an IPO priced at $7.80 per share. It immediately captured market attention, closing its first trading session at $27.80.

Eventually, the stock surged to a high above $2,500 on Aug. 2. This represented an increase of more than 32,000% compared to its initial IPO price and had the firm’s market cap measured in the hundreds of billions of dollars. At its peak, the company had a market cap comparable to firms like Walmart and Procter & Gamble.

HKD has come off that peak. With precipitous drops in the last few days, shares closed Thursday at $800.

The recent trading in HKD brought back memories of the peak meme-stock frenzy, which pushed names like GameStop (GME), AMC (AMC) and Clover Health (CLOV) to spectacular highs.

For a check-in on one of those original meme stocks, AMC has fallen about 9% in Thursday’s premarket action on quarterly results and the declaration of a dividend.