Newly IPOd Regencell Bioscience Holdings Surges On Friday
The stock market can be a fickle being. One moment things like penny stocks are surging thousands of percentage points. The next we see broader markets crater from taper talks. But in between the madness, money is being made however possible. In some cases, day traders may not even pay attention to the stocks they’re buying and only focus on letters and share structure.
This can and has lead to long-term investors falling victim to mistaken identity. We’ve discussed this theory many times in the past with companies like Zoom Video (NASDAQ: ZM), Lucid Motors (NASDAQ: LCID), and even Twitter (NYSE: TWTR) just to name a few. There was even speculation that the popular encrypted messaging app, Signal was publicly trading under the symbol of a defunct OTC penny stock, Signal Advance. (See: Penny Stocks & Mistaken Identity As Tweet Triggers 11,780% Jump For SIGL)
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But it isn’t just penny stocks, apparently. I’ll preface this by saying that this could be total speculation but an interesting theory nonetheless.
RGC Stock Rallies 345%
Recently public Regencell Bioscience Holdings (NASDAQ: RGC)debuted in July. Its 2.3 million share IPO was conducted at a price of $9.50 per share. Like most of the recent IPOs, soon after going public, the stock dropped. This saw shares of RGC stock fall from highs of $13.20 on the day of IPO to as low as $6 this week.
What Does Regencell Bioscience Do?
Regencell Bioscience is a Chinese biotech company developing traditional Chinese medicine. In particular, its medicines are being developed for treating neurocognitive disorders and degeneration for things like Attention Deficit Hyperactivity Disorder and Autism Spectrum Disorder.
This week the company confirmed that there was a partial exercise of the underwriter’s over-allotment option. This generated nearly $25 million in total from the RGC stock IPO. According to the company, “Proceeds from the Offering will be used to fund the second research study, the Company’s TCM formulae and products, staff salaries, facilities rental, renovations and equipment, product and intellectual property registrations, and working capital and other general corporate purposes.”
RGC Stock & Mistaken Identity?
Here’s where the question comes into play. The day they announce the partial warrant exercise, the near-penny stock explodes almost 350%. As attention was raised due to this spike, I’m sure like most, you pulled up the RGC stock chart to see what was up. For readers using TD Ameritrade’s Think Or Swim Platform, here’s what the chart looked like:
Now, I’m not saying that raising almost $25 million in an IPO for a Traditional Chinese Medicine company is a small feat. Nor am I saying that 2.3 million shares isn’t a low amount of shares floating around. But when you look at platforms like Think Or Swim and Charles Schwabb, there’s something interesting that pops up: Regal Entertainment Group. Here’s the thing, once public Regal Entertainment was acquired by Cineworld Group with the definitive agreement signed in 2017. Regals old symbol was “RGC” but clearly the new RGC stock is not, in fact, a movie theatre company.
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Where’s the speculation? A lot of attention has been on AMC Entertainment (NYSE: AMC) for months. Ever since the initial mega squeeze and the second coming earlier this summer. The initial spark for RGC stock could’ve come from the excitement surrounding the final tally from the IPO. But could momentum have caught the attention of other traders who, when pulling up a chart, looking at the letters and seeing a Regal logo, presume a “low float AMC” on their screen? Other social media outlets frequented by day traders like StockTwits, also show a similar thread:
Furthermore, in a Tweet that mentioned RGC stock and TDAmeritrade, the latter responded with:
Whether this “confusion with charts” was an underlying catalyst today is yet to be seen.
What’s Next For RGC Stock?
While shares of RGC stock were low enough to almost be considered one of the penny stocks to watch today, they are far from that late in the Friday session. The next question is what’s next for the stock and company. If you look back above at the RGC stock chart, not much has actually gone on in the market. Volume all but dried up after the day it IPOd and only returned on August 20th.
Furthermore, the only other press release that has come out was a letter from the CEO earlier this month. Which, if comparing dates to the chart, it didn’t entice investors the day it was put out. In it, CEO Yat-Gai Au explained the vision for the company.
“Our first study using personalized TCM formula in Hong Kong showed a drop in assessment scores meaning that ADHD and ASD symptoms were less severe for patient who participated in the study. However, there is no assurance that we can expect similar outcome in our second research study. Encouraged by this positive outcome, we plan to commence our second research study next month in Hong Kong…Once completed, the research study will provide the foundation for the Company to apply for a proprietary Chinese medicine (“pCm”) registration in Hong Kong. We look forward to sharing the outcome as soon as we complete the study.”
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While this story has just begun developing, it is interesting to see how the market reacts to different things. Whether it’s news, momentum, speculation or a mix of a few things, research is important. In this case, RGC stock has shot up over 340% in a single day. Is this rally thanks to a case of mistaken identity or is the market frothy for the next Traditional Chinese Medicine stock? If this is on your watch list right now, leave a comment below with your thoughts on RGC stock trading activity this week.
