What happened

Shares of AMTD Idea Group (NYSE: AMTD) soared on Tuesday as the Hong Kong-based company appeared to capture the fancy of investors. By the close of trading, AMTD's stock price was up a staggering 236% after surging as much as 520% earlier in the day.

So what

AMTD Idea Group is an investment holding company. Its operations span investment banking, asset management, and strategic investments. The torrid gains in its share price appear to be related to a massive rally in the stock price of one of its subsidiaries: AMTD Digital (HKD 7.69%). 

AMTD Digital conducted its initial public offering (IPO) on the New York Stock Exchange in mid-July at a price of $7.80 per American depositary share (ADS).  The digital solutions platform raised roughly $125 million from its stock sale.

Yet, in the days that followed, AMTD Digital's stock price rocketed as high as $2,521.72. Its shares ended the trading day on Tuesday at $1,679, placing its market capitalization at a stunning $310 billion, according to Yahoo Finance. For context, that's more than the market caps of corporate titans like Chevron, Pfizer, and Coca-Cola.

Now what 

AMTD Digital offers financial, media, and content marketing services centered on its "SpiderNet" digital ecosystem. While those businesses might have significant growth potential, it's hard to argue that they justify the company's current market valuation.

AMTD Digital basically admitted as much in a press release today. "During the period since our initial public offering, the company noted significant volatility in our ADS price and also observed some very active trading volume," it said. "To our knowledge, there are no material circumstances, events, nor other matters relating to our company's business and operating activities since the IPO date."

When stock prices surge for reasons other than fundamental business factors, they often quickly reverse. And the corresponding plunge can result in large losses for investors who buy late in the rally. Thus, investors should view both AMTD Digital and AMTD Idea Group as extremely high-risk stocks.