Mystery $33 billion medicine fortune collapses in days

By Filipe Pacheco, Pui Gwen Yeung and Nicola M White

When Yat-Gai Au was worth $33 billion on paper, he wasn’t in his Hong Kong office.

One week later, when his net worth plunged to $10.1 billion, he wasn’t around either.

Officers at the headquarters of Regencell Bioscience Holdings Ltd said both times that Au only takes short visits there, before turning away reporters. The firm, a Nasdaq-listed, Cayman Islands-incorporated traditional Chinese medicine company, occupies the whole 9th floor of a tower in Hong Kong’s bustling Causeway Bay, including a reception area with a large table-tennis table.

Little is still known about the tiny, money-losing company whose shares exploded 82,000 per cent higher and suddenly made Au, its chief executive officer with an 86 per cent stake, richer on paper than some of the city’s tycoons like Li Ka-shing.

The fleeting nature of its rip-roaring rally has captivated and mystified observers from the US to Hong Hong. Morning Brew, a popular business account on X, flagged its stock move and wondered: “Is there something I’m missing?”

Regulators in the US, which closely monitor wild swings in stock prices, might soon be asking the same question, according to experts.

The Financial Industry Regulatory Authority, the watchdog for broker-dealers, has repeatedly warned that small, cheap stocks are more susceptible to fraud. These companies can be targets for pump-and-dump schemes in which fraudsters inflate the stock price and quickly sell their shares.

The US Securities and Exchange Commission, meanwhile, has been increasingly wary about companies listed on US exchanges that are based overseas — and Regencell checks both boxes. The regulator on June 4 called on the public to weigh in on whether the agency needed to amend the definition of what’s called a foreign private issuer, potentially limiting the number of companies that qualify for special status that lets them avoid filing quarterly financial reports or disclosing when executives buy or sell company shares.

“This is an example of very unusual movements in share prices,” said Richard Harris, founder and chief executive of Port Shelter Investment Management in Hong Kong. “These movements could certainly trigger interest by investigators.”

The SEC and Finra declined to comment on whether they were monitoring Regencell’s moves.

Finra’s mission is to protect investors and safeguard market integrity, spokesperson Rita De Ramos said. “In line with that mission, Finra continues to monitor the market for unusual trading activity, as part of our normal course of action.”

Regencell didn’t respond to emails and phone calls for comment on its stock performance and its founder’s fortune. The company’s shares have retreated 74% from their peak, shrinking Au’s stake to about $8.6 billion as of June 26.

Founded in 2014, Regencell’s main line of business is marketing and licensing traditional treatments for ADHD and autism spectrum disorder developed by the founder’s father, Sik-Kee Au. It has exclusive rights over his traditional medicinal formulas, trademarked under the name Brain Theory.

The firm posted net losses of $4.4 million and $6.1 million, respectively, for the fiscal years ended June 2024 and 2023, according to filings. Its chief medical officer position has been vacant since the last doctor to hold the job resigned in 2022.

The younger Au attended the Haas School of Business at the University of California, Berkeley and worked at Deutsche Bank AG in the late 1990s. He suffered from learning disorders and speech problems, had poor grades and an uncontrollable temper, according to a video post on the company’s Instagram account. Regencell’s mission is to “improve and save lives using a natural and holistic TCM formula to treat ADHD and ASD,” according to the same video.

The company’s official Instagram account has more than half a million followers. BeOne Medicines Ltd., the largest healthcare firm listed in Hong Kong, has just over 2,500. Regencell built out a following with the help of social-media campaigns on the platform that offered free tickets for Taylor Swift concerts in the US and Asia.

The company’s second-largest shareholder is Digital Mobile Venture Ltd., a firm ultimately owned by Taiwan’s Samuel Chen and his wife Fiona Chang. Chen was an investor whose early investments in Zoom Video Communications Inc. made him a fortune when the company’s stock soared almost 1,500% during the pandemic.

Chen, Chang and their children own a 55% stake in Taipei-based Polaris Group, a biotechnology company developing anti-cancer drugs. He’s also the biggest shareholder of Sonix Technology Co., a provider of integrated circuits listed in Taipei.

Bloomberg News received no reply to emails sent to Polaris and Sonix seeking comments from Chen.

While monitoring for wild price swings used to be done manually, the SEC and Finra now have programs to automatically detect market anomalies, according to Erik Gordon, professor at the University of Michigan’s Ross School of Business. They can also compel companies to share if they know why their stock price soared or crashed or whether insiders cashed in at the peak.

The absence of profits or revenues at Regencell isn’t an automatic red flag; plenty of early-stage pharmaceutical companies have similar finances, he said.

On June 18, two men and a woman arrived at Regencell’s Hong Kong office seeking information about treatment for ADHD and dementia. They said they read about the stock’s surge before arriving. The visitors were also turned away. An employee said its staff were not doctors, and directed them to the company’s website.

“Early stage pharma companies can jump from a dollar to four dollars in 90 seconds if there’s some news about one of their drugs under development doing well in a clinical trial,” Gordon said. In this case, “what’s interesting is there’s no news.”