Why This Chinese Herbal Medicine Stock Backed by BlackRock and Morgan Stanley Gained 50,000% in 6 Months Despite Posting Losses

Shares of Regencell Bioscience (NASDAQ:RGC) gained 49,637% in the past six months despite record losses since going public in 2021. The Chinese medicine company, with shareholders like Digital Mobile Venture, BlackRock, Morgan Stanley, and RBC, went public in 2021. It develops herbal medicine treatments for neurocognitive disorders, including Attention Deficit Hyperactivity Disorder (ADHD) and Autism Spectrum Disorder (ASD).

The company posted over £7.4 million ($10 million) in losses in the past two fiscal years. Despite being unprofitable, RGC shares made monumental moves on no major developments or company news, leaving investors confused about investment prospects.

The latest RGC stock price surge of over 260% this week could be attributed to the company effecting its 38-for-1 forward stock split, which was initially announced on 2nd June.

While the split in itself does not create value for the company as the overall market capitalisation remains the same, many investors view the move as a bullish indicator since the split-adjusted shares, in this case, will trade at a lower price apiece, making them more accessible to traders and retail investors. The stock price surge also buoyed Regencell's market capitalisation rapidly to £29 billion ($39 billion) on Tuesday.

Potential Tailwinds From RFK's Vaccine Stance

US Health and Human Services Secretary Robert F. Kennedy Jr.'s anti-vax push could have also been an indirect driver of the RGC stock rally. Recently, RFK removed members of the Advisory Committee on Immunization Practices. The independent panel played a role in shaping US vaccine policies.

In a recent podcast, Kennedy Jr. doubled down on his support for non-pharma health treatments. 'We're going to end the war at the FDA against alternative medicine,' he had said.

Regencell claims its traditional Chinese liquid oral formulations to treat neurological disorders contain natural ingredients. The company website lists diverse herbs and details their qualities, which could also help with blood circulation, detoxification, and digestion.

'We have not generated revenue from any TCM formulae candidates or applied for any regulatory approvals, nor have distribution capabilities or experience or any granted patents or pending patent applications and may never be profitable,' Regencell had stated in its October regulatory filing.

Is Regencell the New Meme Stock?

Such massive stock price gains caught the attention of retail traders and drove trends on social media platforms like Reddit, where some users speculated that RGC is the latest 'meme stock.'

'Regencell is doing some weird stuff again,' according to a Reddit user on the r/shotsqueeze subred. Another user posted on the r/pennystocks subred: 'I'm trying to decide if I should pull out before a possible crash.' This person claimed to be a longtime investor in the stock.

'I was gambling. Didn't have a clue what this company is,' another user wrote this month. 'I've been watching it go the last two weeks and keep telling myself that it will crash as soon as I buy back in.'

Interestingly, the stock has only 30 million of the 500 million shares available for public trading, which could explain the wild price swings. Company CEO Yat-Gai Au owned 86% of the company, or a £317.3 million ($426 million) stake, in Q1. His wealth has reportedly swelled to as high as £24.5 billion ($33 billion) this week on the stock rally.

Regencell was founded in 2014 and is mostly self-funded by Yat-Gai Au, who has injected over £8.9 million ($12 million) of his money into the company over the years. The firm has exclusive rights to medicinal formulas developed by Sik-Kee Au, the CEO's father, trademarked as Brain Theory.

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